France awaits results from Macron’s pro-business push

Emmanuel Macron has watched his approval ratings plunge as voters wait for his pro-business reforms to pay off -- but for company leaders like Pierre Loustric, that's not a problem.

France awaits results from Macron's pro-business push
President Macron addresses a press conference on the sidelines of a EU summit at the European Council in Brussels last week. Photo: JOHN THYS / AFP
“I'm not disappointed because I know what it takes to move France,” says Loustric, who expects the lower taxes and eased employment rules pushed through by Macron to eventually help his fragrance start-up hire more people.
“It's the same for a business manager: When you want to change your strategy, it takes a while to see the results,” he adds.
When Macron swept into the presidency in May 2017 vowing to shake France out of its economic torpor, the jobless rate was stuck at 9.4 percent, well above the EU average and more than double the rate in Germany. Nearly 18 months and a series of labour reforms later, unemployment has eased only marginally to 9.1 percent — while Macron's approval ratings have sunk to their lowest to date.
The former investment banker is clearly taking his cue from Germany, where painful overhauls in the early 2000s paved the way for an economic revival which led to a huge wave of hiring. But he has admitted his changes, aimed at freeing companies from a labyrinth of legal obligations, might not bear results for “about five years”.
“Lots of companies haven't yet applied the changes voted through last spring,” said Jean-Louis Mourier, an economist at Aurel BGC.
Those measures were passed by decree, and parliament is currently pushing through a host of new changes aimed at simplifying life for business owners even further. Key elements include exemptions from audits, work councils and dozens of other requirements for small firms, and caps on severance pay in case of contested layoffs — making it less risky for firms to take on workers.
The rules also make it easier for smaller businesses to implement profit-sharing and grant stock schemes.
“That would have been interesting for us,” said Loustric, whose company has developed a technology for diffusing perfumes in homes and offices without relying on solvents or alcohol.
Since its creation in 2004 Scentys has won over dozens of clients both in France and abroad, but it only started turning a profit last year.
“It's not right that the only ones to share the benefits of created value are executives and investors,” he said.
'Less revolutionary'
Yet despite the business community's backing, Macron may find it harder to maintain wider support for his pro-business agenda unless French voters start to see either higher income or more plentiful job offers.
Already his approval ratings have plunged to record lows, with about 30 percent of respondents saying they have a positive view of his presidency. He faces the added difficulty of pushing through his liberalising business reforms while also taking often unpopular steps to reduce public spending.
He has promised to cut 120,000 public sector jobs before his term ends in 2022 — but so far he has announced fewer than 10,000.
And unless growth picks up markedly from the 1.6 percent expected this year, analysts say it's unlikely he'll be able to meet his campaign pledge of a balanced budget — the projected gap between state outlays and income for 2019 still stands at around 100 billion euros.
“They've said they will cut the deficit while also cutting spending, but that hasn't really been the case,” said Mourier, calling Macron's programme so far “a bit less revolutionary than we were told”.
Complicating the economic calculus are looming European Parliament elections next May, where Macron hopes to lead the charge against a populist surge that rails against further cutbacks. A setback for his pro-Europe centrist alliance could rekindle popular opposition to further belt-tightening or policies seen as favouring firms over voters' spending power, some analysts believe.
Business lobbies, meanwhile, remain adamant that payroll taxes and other social charges are still prohibitively high in France, reaching as high as 45 percent of an employee's salary.
“For now, corporate leaders have not felt any loosening of the fiscal vice that is smothering them,” the CPME federation of small-business owners said in response to Macron's 2019 budget plan last month.
But even so, many executives credit Macron with helping promote a vision of France as a more entrepreneurial country that embraces innovation and the private sector.
“You have to change mentalities,” Loustric said. “The most important thing was to show people that France needed to be reformed.”
By AFP's Joseph Schmid
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How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”