Macron Reforms French Economy, As Promised

An image of rising and declining prices Credit: Shutterstock photo

Just over 100 days in office and only 74 since his party En Marche! won an absolute majority in Parliament, President Emmanuel Macron decreed sweeping changes to the national labor code that could ultimately define his administration and the future of the French economy.

Politico has a rundown of the reform's most substantive points - many of which were campaign promises made by Macron and the center-right, pro-E.U. party he led to victory over Marine Le Pen and the far-right National Front in this year's elections. Basically, the reforms to the code du travail , France's national labor law, will fundamentally alter employer-employee relations by giving business owners more control over hiring and firing processes. This, in turn, is expected to stimulate job growth, especially in the domestic small business sector, and create a more flexible workforce, with shorter but more frequent bouts of unemployment.

"The reform of the labor market is a reform of profound transformation and, as I have committed myself, it must be ambitious and effective enough to continue to reduce mass unemployment," Macron told Le Point Magazine, on the same day the Prime Minister and Labor Minister publicly outlined the executive orders expected to take effect later this month.

"Our labor code is seen by foreign investors and by small company bosses as a deterrent to hiring," Prime Minister Edouard Philippe said at the press conference in Paris.

The Macron administration's reasoning, or, raison d'etre is reducing the long-term unemployment rate, which currently almost doubles that of Germany or the U.K. Overall unemployment in France hovers around 10% and, in some regions, 40% among the youth population.

To be fair, those are nowhere near Greece or Spain's levels of outright depression, and the French economy has actually grown steadily for a year now. But after Europe's "lost decade" and the rise of the anti-E.U. nationalist movement as a formidable political threat, the Macron-led government cannot afford to be complacent. Hence the urgency in these economic reforms, which were warmly welcomed in financials capitals across the continent.

Not everybody felt that way, of course. Macron's approval rating has been free-falling for a few months straight and dipped again in the latest voter poll. National union leaders have criticized the caps to be placed on compensation awarded to illegally fired workers and the shift in negotiations from the national level, where the unions hold much more power and leverage, to more local, profession-specific settings. The hard-line trade union CGT already called for a day of action and strikes on Tuesday, September 12, a tactic that has proved successful in opposing presidential attempts at labor reforms since the '90s.

This time around the labor law reforms, currently under review by the French cabinet, will likely go through as announced and go into effect on September 22. The CAC40 , the widely used indicator of the Paris stock market, has demonstrated slight gains in the past 7 days, but nothing like the surge at news of Macron's electoral victory. Long-term effects abroad, specifically on France's standing as the 3rd largest economy in Europe and the U.S.'s 8th most vital trade partner, will prove even more interesting, as will the potential political ramifications at home.

What's for certain: change is coming. The people have spoken. Now it's Macron's turn.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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