France’s 2017 elections present major risks for economy and Europe

France’s 2017 elections present major risks for economy and Europe

France’s turbulent political situation and weakened economy highlight deep fractures within the national and European socio-political classes. A guest post by Nicolas Tenzer, Chairman of the Center for Study and Research on Political Decision.

France heads to the polls next year and the political situation is uncertain at best. Previewing what’s ahead for France in the 2017 elections in two key areas: the economy and the European project.

Economic imbalances

Despite its feeble growth that has generated a worrying trend of unemployment, France remains the world’s sixth economic power. It enjoys great assets: a growing number of start-ups in high-tech sectors, a propitious geographic situation that opens up access to all European countries for its companies, a great network of good universities and elite schools (grandes écoles) in engineering sciences and business administration, very affordable public services, and good value for money health coverage.

Less often noticed, its legal system is very competitive in comparison with common law countries, with less expensive access to justice, better proportionate liabilities, and more legal security in contracts. Last but not least, it hosts world champions in aeronautics, utilities, energy and transport, that provide other sectors, through sub-contracts, with direct economic spinoffs. Most of its major companies (CAC 40) are highly competitive and profitable.

However, some true shortcomings cast a shadow over this brilliant picture. The most worrying is the continuous industrial decline that partially explains the high unemployment rate. It goes with the feebleness of the middle-size companies that contrasts with Germany and Italy and represents a true issue for its trade. Because of the lack of financial resources, the modernization of industrial equipment has stalled, threatening the competitiveness in foreign markets. The labor market’s flexibility remains also a conflicting issue in the public debate.

On the one hand, the workers’ protection remains crucial while the unemployment is high; on the other hand, the strong labor regulations are often blamed for creating disincentives to hire because of the cost of labor contracts’ termination, especially for the small companies with low margins. If the taxation of the benefits is rather high, it doesn’t represent as real of a disadvantage in the global competition as does the burden of social taxes covering mainly health insurance and unemployed workers’ grants.

Balancing Europe

President Hollande is maybe one of the more Europe-minded politicians in France. However, his policy doesn’t fully reflect this strong personal commitment. To understand this paradoxical statement, it must be reminded that the left is deeply divided on Europe, as is the right. All of France’s politicians who support Europe have in mind the no vote on the referendum on the European constitution that took place on May 29th 2005. In search of a compromise, François Hollande has to be cautious not to go too far in advocating stronger European integration. This resulted in his stance during the presidential campaign that he would renegotiate some constraining financial arrangements – fortunately he never did.

The French government has been very committed – and successful ‑ in finding a sustainable solution to the Greek financial crisis. But Hollande still stays on the middle of the road when tackling the refugees crisis. In spite of confident relationships between François Hollande and Angela Merkel, there is no true cohesion between France and Germany, and Prime Minister Vall’s public criticisms on Merkel’s refugees policy in Munich created stupor in both German and French pro-Europe circles.

The strong anti-European of the right-wing National Front and radical left, along with the evolving stance of Nicolas Sarkozy, also indicate that the conservative and the radical leftist electorate is becoming more Euro-skeptic. For the future of Europe, as well as the future of France, this is highly worrying. Not only does it show an embarrassing narrow-mindedness of France’s politicians, that goes hand in hand with the rise of extremism and nationalist public spirit, but it would also have damaging consequences on three realms.

First of all, there are immediate economic consequences. A recent survey of France Stratégie, the think tank reporting to the Prime Minister, has shown that the end of Schengen would mean additional costs for the French economy of more than 10 billion euros, equivalent to 0.5 % of France’s GDP, and greater than 100 billion euros for the EU economy in general (without taking into account the consequences of a Brexit).

Second, there is a political cost: Undermining Europe is also shooting down the country’s common values, which would give a new legitimacy to all of the European project’s critics. Notwithstanding its political consequences, it would create a chain-effect of isolationism, protectionism, and renationalization of common policies, all trends that France’s economy would deeply suffer from.

Last but not least, if major countries like France, Germany, UK, Poland and Italy, are not able to have a common agreement on basic principles, values, and foreign policy commitments, this would dramatically endanger Europe in facing external threats, mainly from Russia.

Political uncertainties lie ahead

Economics and Europe will make the presidential elections crucial. The results are actually not predictable. Nevertheless, some key findings have already been determined. First, support for the far right will be high for a long time, but won’t be winning the elections. Most of the French voters estimate that it is a threat and that Le Pen’s party is all but democratic. However, sadly enough, far-right ideologues have corrupted a large part of conservative electorate and the “Les Republicains” conservative party. Even if the Front National cannot win, they may obtain some more seats at the National Assembly and Senate, and thus could be a true destabilizing factor.

Second, the Socialist Party is truly at risk. The radical left is no longer a threat, but there is a leftist aisle within the Socialist Party and the Greens that could compromise the stable majority on many issues and could make or break some long-awaited reform (labor markets, modernization of the economic structures). Politically, this undermines the President and Prime Minister’s legitimacy, and Hollande’s chances and even candidacy in the next presidential elections.

This turbulent discontent within the Socialists is not truly new, but lack of leadership on domestic issues, continuous changes, failed reengineering of the government in February, damaging communication failures,and an inability to express long-term views has inconsistently fueled it.

The conservative part of the political exchequer is more divided than ever. Beyond the tough rivalries and hatreds between the politicians, there are also major discrepancies on main issues: security, human rights, liberalization versus protection, Europe, etc. Nicolas Sarkozy has deliberately chosen a right-lining strategy on values, Europe, and foreign policy, firing all the moderates that used to hold key-positions in his party.

Sarkozy’s former Prime Minister François Fillon is more liberal on economy and values, but not truly a convinced European. Unacceptably, both Fillon and Sarkozy are Putin devotees. Chirac’s former Prime Minister Alain Juppé is obviously the more moderate, having a strong stance towards far-right values and Putin’s foreign policy, praising Europe, and being moderately liberal on economics. Endorsed by the center-right of the political state, he may as well attract voters from the Socialist party who remain doubtful about Hollande, and often critical about Vall’s strong stances against what they understand as basic values.

If most of the conservative voters do not want Sarkozy’s come-back and if Juppé is the most popular, able to gather on his name alone different political opinions, he may be a strong force. But it should not be forgotten that Sarkozy is a political wolf who perfectly masters his party and won’t hesitate to use tough methods to discredit his competitors. For Hollande, its seems that he would have more chance to compete for the second run against Marine Le Pen if Sarkozy is nominated by the conservative electorate, and less if Juppé is the nominee.

The game is still open, but it will have huge consequences of France’s situation. If Juppé or Hollande are elected, they would have an immediate legitimacy after the elections. Both would have to fight against their own party to impose reform and a strong European commitment, bringing the open-minded spirit that France needs more than ever.

Nicolas Tenzer is the chairman of Center for Study and Research on Political Decision (CERAP), editor of the review Le Banquet, associate professor at Paris School of International Affairs (PSIA, Sciences-Po Paris) and has been invited as a guest professor at many US, Canadian, and South Korean Universities. He is also a former Department head with the French Strategic Planning Office and has authored three official reports to the French government and has served as a senior consultant to international organizations. Follow Nicolas on Twitter @NTenzer

Categories: Europe, Politics

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Guest Post

This article was published as part of the GRI Guest Post Series. GRI guest posts come from leading experts in business, government, and academia. The series strives to bring a diverse range of perspectives on the critical issues of our time. The views expressed in this article are solely that of the author and do not necessarily represent the views or opinions of GRI.