Macron bets on booming French economy ahead of second term | business | Economic and financial news from a German perspective | DW

As the election race in France enters the first round on April 10, front runner President Emmanuel Macron has a strong case to convince voters that his first term’s reforms are bearing fruit – a resilient economy.

The French economy has recovered faster than expected from the COVID crisis, with growth hitting a 52-year record high of 7% last year. In addition, unemployment has fallen to a 10-year low, consumer purchasing power has increased and foreign investment is flowing in.

Since coming to power on a centrist platform in 2017, Macron, a former investment banker and business minister, has pushed ahead with a series of reforms – relaxing labor rules to make it easier to hire and fire workers, cutting unemployment benefits and lowering wages Capital taxes income for households and businesses.

“Macron’s policies have been quite pro-business, although he’s had to adjust some of them amid crises like the Yellow Vests protests and COVID,” Mathieu Plane of the French Economic Observatory (OFCE) in Paris told DW.

“Overall, France’s economic attractiveness at international level has definitely improved.”

The corporate boom shows that Macron’s 2019 pledge to transform France into a “startup nation” was not far-fetched

French startups are booming

One indication of this is the booming French start-up scene. Earlier this year, dressed in a Steve Jobs-style turtleneck, Macron celebrated the country’s 25th unicorn – a more than $1 billion startup – ahead of his own goal for 2025.

“The biggest plus of Macron’s tenure is the dynamism of French companies when you look at their balance sheet, profitability and innovation,” Patrick Artus, chief economist at Paris-based Natixis Bank, told DW. “There’s a huge amount of money flowing into the corporate sector.”

2021 was a record year, with French tech companies raising €11.6 billion in funding, a 115% increase over 2020.

“What it costs” strategy

Experts say the upturn in the industry has also been helped by Macron’s “whatever it takes” strategy during the COVID pandemic – spending heavily on financing companies and helping to retain their employees.

Damien Marc, CEO of JPB Systems, a company that uses intelligent automation and robots to manufacture aircraft engine locking systems, said government aid has enabled it to weather the crash in the aviation sector, retain and diversify its entire highly specialized workforce its products.

According to Damien Marc, CEO of JPB Systems, government aid during the COVID crisis has helped strengthen his company’s market position

“All this government help has actually enabled us to grow our business at a time when companies are laying off workers in many parts of the world,” Marc told DW at his manufacturing facility south of Paris. “We actually gained some market share and came back stronger than ever.”

Last year, the high-tech company received another €1.5 million cash injection from a €100 billion government stimulus plan to boost industry across multiple sectors.

Intelligent automation and robots do most of the work at JPB Systems, which makes locking systems for aircraft engines

Production “still very weak” despite pressure

Experts say the COVID crisis – which has exposed France’s heavy reliance on foreign suppliers – has also given a boost to Macron’s plans to “reindustrialize” by encouraging companies to invest in French industry rather than relying on Asia for industrial imports to leave.

The government is now promoting strategic industries such as semiconductors, electric batteries and hydrogen projects.

Macron has touted new factory openings and foreign investment projects in recent months

“There is now an awareness that France’s greatest weakness has been the deindustrialization that we have seen over the past 40 years and that we have not been able to stop. It is important to reverse this trend,” said Mathieu Plane.

However, he added that manufacturing’s share of the French economy was “still very weak” at around 10% of GDP.

Artus agreed, saying that manufacturing and production had “showed little sign of improvement” during Macron’s five-year tenure despite tax cuts and reforms, adding that a growing trade deficit was another concern.

Experts say a lack of skills and training is holding back French production

“One of the main reasons for France’s lack of productivity is a lack of skills and quality education. That’s a big handicap,” said Arthur. “Macron is trying to push apprenticeships and reform apprenticeship programs, but it will take time to see results.”

Inflation of the national debt

Experts say another area of ​​concern is the state of France’s public coffers following massive government spending and tax cuts.

“The measures have all helped boost growth and boost business competitiveness, but it also raises questions about how all these measures will be financed and the problems of increased budget deficit and public debt,” Plane said.

Conservative Republican nominee Valerie Pecresse has accused Macron of spending endless amounts of money and “racking the coffers” to secure pandemic emergency funding and taking the national debt to a record high of about 115% of GDP.

Voters feel left behind

While Macron’s reforms are credited with boosting business, many wonder if economic gains have faltered. Polls show voters’ biggest concern is dwindling purchasing power. Price increases related to the war in Ukraine have further heightened concerns.

At a vegetable market in east Paris, Isabelle, a single mother of three, said she’s increasingly feeling the cost of living rising. “Prices for essentials and petrol have gone up and we need to be a lot more careful about how we spend our money,” said the 38-year-old.

Many ordinary French people do not feel that their lives have improved under President Macron

When asked about Macron’s policies, Isabelle, who works at a hair salon, said: “We don’t feel that our lives have improved much since Macron’s wealth tax abolition in 2018.

Patrick Artus said that although France created about 700,000 private sector jobs last year, many are unskilled and poorly paid.

“It is true that many French people who work in retail, catering, cleaning or logistics are poor,” he said, adding, however, the data showed that the government was spending huge sums of money and public transfers have to support them, most recently 15 billion euros to cushion the blow of rising energy prices.

However, Macron is banking on his economic record, saying earlier this month he would push ahead with reforms to transform the economy if he wins a second term.

It remains to be seen if that gamble will pay off when French voters go to the polls in April.

Edited by: Hardy Graupner