There have been thousands of contributors from civic society, local committees set up across France grouped by subject themes, hundreds of experts debating plans and groups analysing the proposals and selecting the best. Emmanuel Macron has certainly done his best to highlight the original way his election manifesto has been put together, and used this unorthodox approach to justify its late appearance. It needed time to blend all the elements together, he explained, before his measures could be unveiled on March 2nd.
But was it really necessary to mobilise so much energy behind his manifesto? Reading his economic and social plans there is really nothing new; they are in perfect, liberal accord with what Europe wants. In itself there's nothing surprising about that. Emmanuel Macron has never hidden that he is in favour of ever more advanced European integration, carried out through political, tax and budgetary harmonisation. His policies demonstrate this unswerving support. In his manifesto there is no diversion from, nor the slightest suspicion of doubt about Europe's economic remedies, even though they contributed to bogging the euro zone down in economic stagnation and mass unemployment between 2010 and 2015. Nor, in Macron's plans, is there the slightest reflection of the important revision work that have taken place in economic circles in the United States, where some studies conclude that economic liberalism has been oversold, aggravating inequalities and hampering the chances of a return to lasting growth.
Enlargement : Illustration 1
The discussion does not seem relevant as far as Emmanuel Macron is concerned. For him it appears that Europe is the only route to follow, as it has been during the entire presidency of François Hollande, under whom Macron was first deputy chief of staff then economy minister. A large number of his social and economic measures are even cut and paste copies of recommendations sent by the European Council – made up of the heads of government and state of European Union members - to France in the context of the EU stability programme in 2014, 2015 and 2016. They are all there: policies on public finances, pensions, unemployment, workers' rights and major projects such as the digital roll-out, all originating in EU recommendations.
Even the method of setting them out is the same. Following the example of the European Commission, the former civil servant refuses to give an overall coherent framework to his policies, even though he continually claims he has a vision for France. He instead prefers to set out a series of points, as he had done when he was the rapporteur on the Attali Commission on economic reform set up under President Nicolas Sarkozy and, as economy minister, for his legislation aimed at kick-starting economic growth, known as the loi Macron. This is how the European Commission operates when it calls into line countries in the euro zone, thus reducing politics to technocratic listing.
Enlargement : Illustration 2
Emmanuel Macron does, however, formulate these policies in his own way. Because he knows that some words can spark controversy, he has removed from his manifesto any reference to the politics of austerity. In the course of one sentence he simply mentions “a deficit not exceeding 3% [of GDP] from 2017 and reaching, in 2022, the medium term objective of structural balance, that is -0.5% of GDP”. It is as if this was just an incidental mention, a small reminder of something there was no need to dwell on.
In fact, however, it is about following to the letter the budgetary rules that are defined by the EU. But while Macron does not cite the source, he does give his own policy translation: public expenditure must be reduced by 60 billion euros in five years, in order to bring the rate of public spending down to the European norm. A whole raft of measures are proposed to achieve this, ranging from the axing of 50,000 civil service posts to the capping of health spending and a reduction in local government spending.
All this is exactly what the European Council advised in its formal letter of recommendations sent to France in July 2016, saying it thought that France should “ensure a durable correction of the excessive deficit by 2017 by taking the required structural measures and by using all windfall gains for deficit and debt reduction”. And that it should “specify the expenditure cuts planned for the coming years and step up efforts to increase the amount of savings generated by the spending reviews, including on local government spending, by the end of 2016”.
The revised view of the International Monetary Fund on the impact of so-called fiscal multipliers when it comes to economies and the under-estimated consequences of a reduction in public spending on the economy seems to have been forgotten, despite some of the rhetoric from Macron's team. “We have to get out of this belt-tightening logic, get out of the reasoning under which one constricts spending and move to a thinking in which one commits the country to economic and environmental transition,” says Jean Pisani-Ferry, who was general commissioner of the advisory body France Stratégie, which reports direct to the French prime minister, and who has joined Macron's campaign in charge of the 'policy and ideas' section of his En Marche! movement. “It's a strategy that is based fundamentally on the supply side but at the same time that has some demand side effects.”
Motivated by the same prudence, Emmanuel Macron has banned use of the word 'reform', which is seen by the public as another word for socially regressive policies. Instead he speaks of mobility, change and flexibility. In other words a France on the move, as the name of his movement En Marche! suggests.
However, behind this consensual facade Emmanuel Macron's plans do indeed speak of implementing the plan for 'structural reforms' that both the European Commission and the European Central Bank (ECB) have been clamouring for. He intends to bring in a major reform of pensions without delay. It will be a points-based system, giving freedom to everyone to retire when they want, a system under which “each euro contributed will give the right to the same amount” when it comes to the pension, he has said. He then reconsidered the proposal by explaining that pension contributions may vary according to a person's profession and that the retirement age could be different.
“It's a Scandinavian model,” said Jean Pisani-Ferry trying to reassure. “It's the reform that was introduced in Italy,” counter the group of economists Économistes Atterrés who oppose the “neoliberal paradigm” backed by the EU and many European governments, and who have analysed the proposals. The economist group then adds: “The Italian example shows that the reform will allow the future pensions of today's young people to be strongly reduced.” It would appear that this is the goal here, even if it is not openly stated.
The planned demolition of the French social system
In its report on France in 2016, the European Commission remarked that the French pension system was “relatively generous” in spite of recent changes. “Despite these reforms, the 2015 Ageing Report forecasts a decline in public pension spending only after 2025, thus the main issue related to pensions is the current and medium-term level of public pension spending,” it said, before emphasising the need for “additional measures”.
The other major reform proposed by Emmanuel Macron concerns unemployment benefit, and will see the state taking over the organisation UNÉDIC, which oversees unemployment benefits and which is currently run by representatives of trade unions and employers. The founder of En Marche! insists that this is a big reform, which will allow unemployment benefit to be available to everyone “employees, artisans, independent tradespeople, entrepreneurs, professionals and farmers, and will facilitate the transition from one status to another”. In France different categories of profession have different rules or regimes relating to their benefits and different organisations handling them. This reform would lead to the abolition of all the so-called 'special regimes' operating in some sectors and would unify all of the 37 current different systems. Here, again, the European Council has been calling for this reform and the abolition of the 'special regimes' for some years.
How this state unemployment benefit will be financed is still unclear. Macron's plan is to replace employee contributions (2.4% per worker) with funding via the CSG tax or social charge. But will employers still continue to pay their contributions towards unemployment benefit? In any case the use of CSG, which is not a progressive tax and which is also paid by many pensioners, will bring down the entire current unemployment benefit system. “The risk is that unemployment benefits become a universal benefit whose level will be very low,” warn the the Économistes Atterrés. This temptation will be even greater given that it will be a centralised system and that, like the points system for pensions, it will just require a government decree to fix the amount.
This reform of the unemployment benefit system is something the European Council is very keen on. “Structural measures are needed to ensure the viability of the system. In particular, eligibility conditions, the degressive structure of benefits and the replacement rates for workers with the highest wages should be reviewed between the social partners in charge of managing the system,” the Council wrote in July 2015. In its 2016 recommendations it urged France to take action by the end of 2016 “to reform the unemployment benefit system in order to bring the system back to budgetary sustainability and to provide more incentives to return to work”.
Emmanuel Macron has certainly taken heed of this last piece of advice. His manifesto states: “If more than two decent jobs, according to the criteria of salary and qualifications, are refused or if the intensity of the job hunting is not sufficient, then benefits will be suspended.”
These reforms, which hit at the very foundations of the French social security system, were announced without any prior consultation with social partners - the unions and bosses' organisations. It is highly probably that if Macron is elected discussions on this issue will be minimal, even non-existent. Though he is keeping quiet on the issue, some observers think that Macron will not hesitate to implement everything though executive orders, those same executive orders that he was accused of abusing to pass the loi Macron, the law that bears his name.
The European authorities may not be concerned by the use of executive orders rather than discussions between social partners to carry out the reforms, as from their language they seem to consider that equal representation is both uncertain and too complicated, especially when it comes to employment laws and workers' rights. In 2016 the European Commission said that the thresholds and “regulatory burden” faced by companies in France had “hampered … productivity growth”. In 2015 the European Council called for reforms to “labour law to provide more incentives for employers to hire on open-ended contracts”.
When he was employment minister, Macron's rivalry with the prime minister Manuel Valls prevented him from bringing in the wide-ranging legislation on employment law that he wanted. If elected president he wants to continue his work in this area and legislate on those issues he was not able to get put into the – deeply controversial - employment law known as the loi El Khomri. He plans to put employment law negotiations as “close to the ground” as possible by allowing company-by-company agreements to define the length of the working week, to “adapt employment law according to size” as he puts it. Just one new rule would be brought in at national level: a limit and a ceiling would be introduced for industrial tribunal compensation. This was a measure Macron failed to get put into the loi El Khomri.
Among all the recommendations it has made to France, one that is particularly favoured by the European Council is to make permanent France's CICE tax break for businesses and all measures that reduce the cost of employment, which they consider “too high” in France. In its July 2016 recommendations the European Council stated: “Policy measures to reduce labour costs and improve firms' profit margins have been undertaken through the 20 billion euro tax credit for competitiveness and employment and the 10 billion euros in additional cuts in employers' social contributions under the responsibility and solidarity pact. The design of these measures, which account for 1.5 % of GDP and contribute to reducing the gap between France and the euro area average in terms of labour cost, may hamper their effectiveness.” It calls for France to “ensure that the labour cost reductions are sustained”.
However, other than improving companies' profit margins, the tax breaks have not done what it was claimed they would do. According to an evaluation by France Stratégie, then run by Jean Pisani-Ferry, this tax measure did not have an “observable effect” on investment, research and development and exports. It would “probably have had a direct effect in the order of 50,000 to 100,000 jobs created or safeguarded in the period 2013-2014,” added the report. In other words, a lot of money spent for no great impact. But that does not stop Macron and his team from planning to continue with the measure in another form. The En Marche! manifesto aims to replace the CICE scheme with a reduction in employers' charges by 10 points for all jobs at the minimum wage level and by six points for jobs paid above that level.
On top of this, Emmanuel Macron wants to reduce the amount of tax paid by companies. Once again it is Europe that has led the way. “Taxes on corporations started decreasing modestly in 2014 ... Beyond the ongoing phase-out of the solidarity surcharge on companies and the suppression of the exceptional corporate income tax, concrete steps to reach the announced objective of reducing the corporate income statutory rate to 28 % in 2020 have to be fully specified,” the European Council said in July 2016, which added that there was a need to reduce the nominal rate of corporation tax.
France's 2017 budget legislation is already aiming to reduce corporation tax to 28% from 2017 for small and medium-sized firms with annual profits of below 75,000 euros, then to all companies between now and 2020. The En Marche! manifesto says they want to go further. “We will reduce the corporation tax rate to the European average of 25%. It's an indispensable measure for attracting business activity into France and supporting our businesses' competitiveness. In exchange we will defend a harmonisation of [tax] bases and a convergence of corporation tax rates at a European level to avoid a race to the lowest rate,” it says. The estimated cost of this tax reduction is at least 12 billion euros.
In the end there is just one measure recommended by Europe that Emmanuel Macron has not adopted. For several years the European Council has criticised France for having brought in too many reduced Value Added Tax rates, for having a top VAT rate of 20% that is below the European average and for VAT receipts lower than are also lower than the European average. A 2015 European Commission working document said there was “scope for rebalancing the tax structure and for shifting some taxation from business and labour to consumption”. In its 2016 report the European Council repeats the call for “broadening the tax base on consumption, in particular as regards VAT”. Emmanuel Macron has not included that in his proposals. For the moment, at least.
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- The French version of this article can be found here.
English version by Michael Streeter