The Road Ahead for Emmanuel Macron Won’t Be Easy

(Bloomberg) -- The summer holidays are winding down for French President Emmanuel Macron but in the Elysee Palace things are just beginning to heat up.

Macron met with his administration on Wednesday for the first time since the recess to prepare a new batch of reforms ranging from expected cuts to the 2019 budget to economic and social policy changes.

But the 40-year-old leader could run into obstacles as the sheen from his 2017 election fades amid stubbornly high unemployment and sluggish growth. Macron’s approval rating is at a low and negative sentiment is still fresh over a video released by Le Monde newspaper showing his private bodyguard beating demonstrators at a May Day protest.

Priorities set in the next budget will matter for the euro-area’s second-largest economy, which is not growing as well as Macron has predicted. Consumer spending, the motor of the French economy, is still on a roller coaster with growth -- a 0.2 percent expansion is expected in the second quarter -- trailing both Germany and the European Union. And more seriously for the president, the unemployment rate is still just 0.2 percentage point lower than when he took office.

The Road Ahead for Emmanuel Macron Won’t Be Easy

Budget discussions are set to bring cuts in housing, social spending and others areas while preserving education, security and defense spending. The government is expected to unveil the details of the bill in September.

The reforms planned in the coming quarter include overhauling the dysfunctional emergency healthcare system, a “poverty strategy” to change how benefits for the most needy people are distributed, a controversial plan to directly deduct income taxes from paychecks and a giant bill to loosen rules around business development. The government is also gearing up for what will likely be its largest battle: re-writing the pensions system.

When he took office 15 months ago, Macron began instituting reforms, such as looser labor rules, tougher unemployment benefits obligations, a revision to the national rail company’s organization and a new wealth taxation system. Unexpectedly, the trickiest reform may be to put his own Elysee presidential palace in order after the bodyguard scandal.

The “Benalla Affair” -- named after the 26-year-old private adviser Alexandre Benalla -- put Macron under fire and the Elysee’s dysfunctions in the spotlight. The transformation of the 365 rooms palace and the habits of its 820 workers might prove to be touchy, an official in Macron’s office said.

Cleaning House

Administration officials have pledged to clean house and apply the mantra of “bringing France into the 21st century” to the presidential palace. Macron’s team is intent to show it’s taking the aftermath of the scandal more seriously than before the summer break.

A reorganization will start by Christmas and talks with the staff to prepare the grounds are ongoing, according to an official. One issue that will be dealt with, which was highlighted by the bodyguard scandal, is the multiple chain of commands, hierarchies and roles that mask problems in the functioning of the office.

During a visit to Romania just a year ago, Macron said that “French people detest reform,” and the best way to foster change was to show the electorate that they are “transforming” to something greater. Overcoming this difficulty will be tested again this year.

©2018 Bloomberg L.P.