Viva La Macronomics, Part III

Viva La Macronomics, Part III

This article is the final installment in the three-part series on French President Emmanuel Macron's economic policy. We have covered many of his different proposals in the two earlier articles, conducting a point-by-point analysis of them all.

Now, we shall complete this analysis with an examination of two key proposals forming part of Mr Macron's economic agenda and shall conclude with a brief verdict of Mr Macron’s whole plan.

Public Investment and Fiscal Stimulus

According to Reuters, Mr Macron intends to spend 50 billion euros on public investments, with the following outlays for different priorities:

- 15 billion for training/changing skill-sets to find jobs.

- 15 billion on energy/environment targets: exit within 5 years from coal-based energy production, shift towards alternative, renewable energy sources, rise in carbon tax.

- 5 billion in farm sector financing for environment-friendly projects, local production cooperatives and aid during price crises.

- 5 billion for transport and local infrastructure, with a focus on renovating old train lines rather than building new ones.

- 5 billion euros on health sector, including better cost reimbursement for eye wear, dentures and hearing aids, plus move away from wasteful medicine packages that contain more pills than a patient needs.

- 5 billion on modernization, computerization of public administration.

This is a comprehensive and praiseworthy plan. It does not spend on areas that are wasteful and ensures there is no excessive expenditure, given France’s poor government finances. The plan, admittedly, does not invest very much in high yield investments. However, it has prudent investments in areas such as skills training, local infrastructure, modernisation of governance mechanisms and energy modernisation,. This plan could nudge the economy onto the right path. But whether it can be implemented with success depends on Mr Macron's labour reform passing.

Investment favouring job growth and economic development will not bear much fruit without a system of labour law that supports the ease of doing business. And with Mr Macron's proposed reforms facing considerable opposition, it remains to be seen whether this stimulus will be effective.

EU reform

Mr Macron's proposed EU reforms appear to have quite a radical tone to them and try to project French leadership of Europe. The Financial Times reports that Mr Macron's EU reform plan has many proposals including harmonization of corporate tax rates and social security benefits, a new European trade prosecutor and an EU intervention force. One of the most radical reforms proposed by includes a bigger EU budget and a carbon frontier tax on imports to the EU.

Firstly, these proposals are likely to face much opposition from quite a few quarters. Mrs. Merkel would be quite skeptical about Mr Macron's EU reforms after her election debacle and would want to check the rise of the AfD by preventing further EU integration that leads to populist surges.  Additionally, Mr Macron might quite certainly face opposition at home for his EU reform ideas, as indicated by how Marine Le Pen’s Euroskeptic agenda gained much traction in the French election.

There are other concerns with these reforms, as well. Greater contributions to EU budgets would lead to more spending for countries like Germany. This expenditure would be without much return as governments with high spending and fiscal indiscipline in cash-strapped Southern Europe would use most of the EU money. The result of this reform would not help jump-start European economies as it would provide cash instead of economic reform to countries with spending and regulatory issues.  

Further, Mr Macron's reforms do not expedite trade for France or ensure greater economic cooperation. In fact, they increase the burden of harmonizing policy and further regulatory burdens on countries including France, which is rather ironically trying to deregulate its economy under Mr Macron. Mr Macron's plans do not allow countries to cater economic plans to their respective needs and prevents them from being responsible for their own economic decisions, which may end up affecting the whole Eurozone. For instance, it would be extremely difficult for countries to align social security and corporate tax policies which have been designed for the peculiar needs of a country. It is true that such alignments would make the EU a uniform business zone. However, the act of aligning such policies would harm businesses that are used to certain policies in their own countries.

Also, much of the good from this policy would be taken away by Mr Macron's proposed carbon tax and new Trade Commissioner. Mr Macron's proposals do not try to enhance trade in the EU by giving countries the freedom to make pro-business policy and instead seek further integration for growth when no more is needed and when the countries of the EU have not incentivized business in their jurisdictions.

Mr Macron's plan for the EU, thus, seems to have bleak prospects and flawed wisdom behind it.

In the end, the sentiment in regards to Emmanuel Macron's economic plans seems to have a degree of cautious optimism. He appears to be on the right track in general with labour reform, fiscal discipline and a corporate tax cut. But he fails to have policies with teeth that can spur growth. His policy approaches do have a few problems and face considerable political opposition, especially with regard to labour reform. According to the New York Times, “[a] recent poll found that Mr. Macron’s popularity fell by 14 points in August, after a fall of 10 points in July. Only 40 percent of respondents said they were satisfied with the president’s performance.” This is worrying and could pose a setback to much-needed economic reforms.

It is, thus, hoped that Mr Macron will be able to make changes to his plans and will bring about political unity in his favor, as he did in the French Presidential election, for France stands to gain considerably from quite a few of Mr Macron's plans.

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