There have been four departures from the French government since the second round of the legislative elections on June 18th.
Three ministers resigned last week over the alleged misuse of payments for assistants in the European Parliament – which has hit the centrist Democratic Movement (Modem), a junior party in President Emmanuel Macron’s coalition – including the Modem party’s leader François Bayrou, the former justice minister. Richard Ferrand resigned to lead Mr Macron’s party in parliament after he was dogged by a nepotism scandal. The resignations come as embarrassment for Mr Macron as he was campaigning on a promise of raising ethical standards in politics.
The financing scandal reminded the French people of François Fillon, the centre-right presidential candidate whose campaign was destroyed by allegations that he had used public money to pay his wife for a fake job as his parliamentary assistant, and came ahead of far-reaching economic reforms, including a bill to make the labour market more flexible.
France’s two-tier labour market protects permanent employees at the expanse of young people (the unemployment for the under 25s stands at 25 per cent). The reform of the 3,000-page labour code, which is blamed for discouraging hiring, will give companies greater freedom to negotiate with employees and unions on wages, hours and working conditions. Lay-offs will be eased and damages for wrongful dismissal will be capped.
Mr Macron doesn’t need the support of the Modem party to push structural reforms to reinvigorate the economy through parliament. His centrist, pro-EU La République en Marche, a cross-party movement that was created a little over a year ago, secured 308 seats out of 577 in the National Assembly in this month’s legislative elections, while Modem took 42 seats. The centre-left Socialist party suffered a humiliating defeat after François Hollande’s unpopular presidency, winning only 44 seats, its worst result in modern history. The party’s existence is now under threat. The centre-right Republicans form the main opposition after winning 137 seats, down from 199 in the previous assembly. Jean-Luc Mélenchon’s far-left Unbowed France party secured 17 seats. The nationalist National Front (FN), whose leader Marine Le Pen lost to Mr Macron in the presidential run-off on May 7th, took 8 seats.
Ms Le Pen won a seat in the National Assembly for the first time, but the FN fell short of the 15-seat threshold needed to be recognised as a parliamentary group. Mr Mélenchon and Ms Le Pen will certainly be the nosiest opposition to the government as they fiercely oppose liberal economic reforms central to Mr Macron’s vision of change. The Republicans must decide how to handle the government as they favour much of Mr Macron’s reform programme.
Reform-minded President, who seeks to work across the party divide, is in much stronger position than his Socialist predecessor, François Hollande. Failure to narrow the economic performance gap between France and Germany will severely dent his credibility.
Mr Macron inherits the economy, which is showing signs of improvement. GDP rose 0.5 per cent in the first quarter, the same as in the previous three months, according to the statistics agency Insee. That was up from a flash estimate of 0.3 per cent. The economy grew 1.1 per cent on a year-on-year basis. Consumption remained flat over the quarter, but gross fixed capital formation rose 1.2 per cent after a 0.7 per cent increase in the previous quarter. The European Commission predicts that the eurozone’s second-largest economy will grow 1.4 per cent this year and 1.7 per cent in 2018. The unemployment rate dropped to 9.6 per cent in the first quarter, from 10 per cent in the fourth quarter of 2016. The is the lowest level since the depths of the eurozone crisis, but double what it is in Germany as companies are reluctant to create permanent jobs because of high social charges and because dismissals are expensive.
Photo: French Embassy in the U.S.
