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25.07.2019 36

France: the reform momentum stays alive after the Yellow Vest crisis

Published 

25 July, 2019

5 to 10 minutes
25.07.2019
36
France: the reform momentum stays alive after the Yellow Vest crisis
Published 

25 July, 2019

5 to 10 minutes

The essential


  • During the first 18 months of his presidential term, Emmanuel Macron has put through a highly ambitious set of reforms inspired by supply-side economics and the Nordic flexicurity model.
  • While the biggest accomplishments have been in taxation and the job market, the goods and services markets and social benefits programmes have also been addressed.
  • Macron’s policies have been praised by business-friendly international organisations, with some of them ranking France as the developed country that had conducted the most long-term pro-growth reforms in recent years, in clear contrast with its major neighbours.
  • Public accounts also continued to improve gradually.
  • But then, the yellow-jacket crisis forced the government to deviate from its initial stance and to enact demand-side measures and less aggressive fiscal consolidation.
  • Even so, supply-side momentum is still well under way, with, here again, major accomplishments carried out or planned in 2019 and beyond.
  • Despite the yellow-jacket crisis and the mixed political outcome of the European elections, the balance of political power remains favourable to continuing the reforms.
  • The main test will be a major pension reform, which is now planned for Q1 2020.
  • However, the government’s fiscal targets are now probably overly ambitious.
  • In the short term, the main risk is more from a resurgence in social unrest than from the mainstream political opposition, which has been weakened into insignificance.
  • The cumulative impact of reforms will be positive and will show up in potential growth and structural unemployment, which will improve the French economy’s relative position compared to its neighbours’ economies.
  • However, this macroeconomic improvement alone may not be enough in responding to the widespread discontent caused by the structural transformations of the economy in France as in other developed economies.

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This website is solely for informational purposes.
 
This website does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service. Any securities, products, or services referenced may not be registered for sale with the relevant authority in your jurisdiction and may not be regulated or supervised by any governmental or similar authority in your jurisdiction.
 
Furthermore, nothing in this website is intended to provide tax, legal, or investment advice and nothing in this website should be construed as a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. There is no guarantee that any targeted performance or forecast will be achieved.

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