July 18, 2017 | by HENRIK UTERWEDDE
Is France entering a phase of fundamental change? Emmanuel Macron has gotten off to a convincing start. He is cleverly and decisively enlisting support from politicians and society for his reforms.
The authors of this year’s Social Governance Indicators (SGI) Report from Bertelsmann Stiftung, which will be published in August, had this to say about France’s capacity to govern and need for reform shortly before the country’s presidential election: “France needs bold measures that encompass clear, sometimes unpopular decisions, it needs to openly name its problems, it needs more social dialogue, and coordinated, homogeneous government action.” Against this backdrop, the first fifty days of Macron’s presidency have been extremely encouraging: He wants to overcome the country’s key structural challenges. Problems that have been known for a long time and noted in SGI reports of years past too – bureaucracy, national debt, the labor market, career training, the welfare state, and modernizing how social outcomes are negotiated – are on his reform agenda. He is ready to act – and to do it quickly.
The president’s roadmap: labor market, education, tax and debt
He is giving top priority to an extremely controversial reform of the labor market. It is intended to give businesses more freedom to adjust their human resources policy to their economic situation. The reform will enable companies to make agreements on employment, work hours, pay grades, and wage structures that diverge from industry agreements. The president wants to facilitate social dialogue within companies and simplify the long and costly employment tribunal cases that often follow terminations. In return, he wants to strengthen workers’ social rights to advanced qualifications and improve unemployment insurance benefits.
Before the end of July, Macron wants to get full permission from parliament that this reform shall be laid down by decree. This would give him complete freedom to simultaneously hold ongoing, intensive consultations with trade unions and business federations and flexibly respond to their criticism. Macron wants parliament to pass those planned regulations in September. His plan for reform has great economic significance, but it is also highly significant politically: It is a litmus test for Macron’s ability to push through unpopular decisions and bring about real change in his country.
Another one of Macron’s focuses is on immediate measures to provide professional qualifications for the unemployed and a reform to the system of career training, which he intends to pass in 2018. The goal is to expand dual apprenticeship training, a method in which schools and companies share the training load. This affects a sensitive part of the system too: school leavers face major obstacles that prevent them from being integrated in the labor market and have resulted in a notoriously high youth unemployment rate.
A third priority of the president is to hire new teachers in order to send a signal for the difficult, deprived areas in the suburbs. The goal here is to cut elementary school class sizes in half.
Tax policy is Macron’s fourth area of focus. He wants to give additional, lasting relief to businesses, but he also wants to strengthen low and middle income households. However, he does not have a lot of room to do so given that President Hollande left office with a much higher deficit than had previously been assumed. In addition, Macron is determined to bring new debt down below the three-percent limit in the EU’s Stability and Growth Pact in order to strengthen France’s credibility among its partners in the EU. This could force cuts or delays in some planned expenditures.
Decisiveness and negotiating skills are needed
Even if the president’s agenda is convincing and his plans tackle the country’s core problems, he still needs political support to push them through. How are his abilities in this area?
The institutional prerequisites are positive: The president has a clear majority in parliament. In addition, the constitution of the Fifth Republic gives the president and the prime minister the ability, in principle, to effectively lead the government, to issue directives to individual ministers, and to ensure the administration’s effective implementation of agreed measures.
The political environment is equally favorable considering that Macron has managed to break up the traditional left-right polarization that is often ideologically set and therefore sterile, and to achieve broad consent for his centrist approach. This means he can bring together moderate, reform-minded powers on the left and the right to create a reform coalition for the first time. Macron wants to act quickly because reforms need time to have an effect, but also because he wants to use the high approval ratings that his reform agenda currently enjoys among voters. Whereas Hollande’s political purposes often failed to win support from his own Socialist Party, Macron’s plans for reform have so far enjoyed the full support of La République en Marche, the movement he founded in 2016.
Another question concerns the extent to which Macron can overcome the strong social resistance that is typically arising in France and the widespread, sometimes aggressive aversion to any measures that are seen as putting businesses first. Unions have been able to organize many large protests against reforms of that kind in the past. They are openly threatening to flex their muscles in September, when the parliament is slated to vote on the planned labor market reform. This is another reason why Macron is in a rush to use a strategy of intensive dialogue to get both sides of industry involved in policymaking. Some elements in the union camp are very open to change, and Macron wants to use that readiness. As a result, the government has begun extensive consultations with each of the eight most important union associations and business associations, which will ultimately comprise 48 discussions.
Macron will need his decisiveness and all his negotiation skills to pass the acid test of reforming the labor market. Only then will we be sure that France is on the move.
Henrik Uterwedde is a professor in comparative politics and an associated researcher at the Deutsch-Französisches Institut Ludwigsburg (DFI). He co-authored the forthcoming SGI report on France.