Transcript: Le Maire Says Macron Reforms Are a ‘Success for France’

(Bloomberg) -- Bruno Le Maire is in his fifth year as France’s finance minister—no easy feat in French politics—and all of them serving under President Emmanuel Macron.

So, it’s no surprise he concluded his recent interview with Stephanie Flanders, head of Bloomberg Economics, by insisting that his country is well positioned for the years to come. “If you want to build something solid for the French nation and for the French people, you need time,” he says.

That’s a sentiment likely shared by Macron, who’s seeking reelection this spring against far-right challengers in a nation where some of the electorate is moving in that direction. For his part, Macron is making France’s resurgent economy a centerpiece of his campaign. In his chat with Flanders, Le Maire boasted of the highest employment in 50 years and defended Macron against criticism he’s moved to the right as well—just in time for the election.  

The below transcript has been edited for clarity.

Stephanie Flanders: We’re delighted to have the French finance minister back with us. Welcome back to Stephanomics, Mr. Le Maire. Many people listening to this podcast are in America and in other places, and many of the stories we see coming out of France in the run up to this presidential election have been about immigration, security and, of course, the pandemic. But President Macron came to office five years ago on a platform of economic change. We were going to see a wave of supply side reforms that would end decades of relative economic decline for France. So do you think that Macronomics has succeeded? What’s happened to that agenda? 

Bruno Le Maire: I think that Macron has been successful in restoring the French economy and in making the French economy more competitive. And the promise that he made in 2017 was to introduce a total overhaul of the French taxation system, of the French competitiveness for the sake of having more jobs and more growth. And here we are. We have more growth with the level of 6.25% of growth for 2021. And we restored the pre-crisis activity level no later than November of last year. And as far as employment is concerned, we have the highest employment rate in 50 years, 67.5% for 15-to-64 year-olds. So I really want to insist on the fact that the economic policies that have been introduced by President Macron are a success. Success for France and a success for the French people. 

Flanders: You’re right that employment is stronger than it has been in a while, but unemployment is still much higher than in Germany. And if you look at the forecast of our economists, of other economists, they don’t seem to expect higher, long-term growth for rates in France as a result of any of these policies. So in that sense, Macronomics does not seem to have had an impact. 

Le Maire: No, I share your point of view on the necessity to reinforce those results, but I would like to underline that we have a very sound and solid basis to reinforce the French economy and to make it better over the next years. The level of corporate tax was 33.3% in 2017. We reduced that level to 25% for all companies in 2022. We also have very positive results on the creation of private companies and on the scale up of startups. So I think that there is a need to continue reducing the level of taxation on private companies. I think that we have to reduce the level of social charges on the highest wages if we want to be more competitive for the technological industries. And we also have to think about the best way of improving the skills of the French workers. But my point is we are on the right track. We did the necessary reforms. There is a need to do more. There is a need to do better, but we are on the right track by improving the French offer, which was to me, the key point in the French economy, 

Flanders: You have talked about the energy price rise that the all of Europe is seeing as an absolute emergency. Clearly it’s a massive issue in the U.K. and other places. Households are bracing themselves for maybe 50% increases in their energy bills in April in the U.K. France has made this, what’s from the outside, an extraordinary commitment to cap the impact on households this year to only a 4% rise. You are the finance minister. Can you really afford that to write that blank check to French households, and who is going to pay for it in the end?

Le Maire: It’s an absolute necessity. And I think that we will have to share the cost of course, between the French state, and we are already paying 8 billion euros to reduce the level of the energy prices, the electricity prices for both the households and the private companies. And we will need to do more because the increase on electricity prices might reach 35% to 40% for the year 2022. So there is an absolute necessity to intervene if we do not want to have very strong difficulties for the households and a threat on the private companies, especially on the industrial companies.

So we have decided, first of all, to reduce the level of taxation on electricity prices. This is the first response that we have given with the prime minister to the increase on electricity prices. But it won’t be enough. So we are working very closely with EDF, Électricité de France, to try to build a second response, which will complement the first one, and which will allow us to stick to the promise given by President Macron, to cap the electricity prices to 4% in 2022. I hope that we will find the response that we will be able to propose with funds no later than the end of this week. 

Flanders: And do you see that as an economic necessity or a political necessity? Because I look around Europe and there’s the same kind of energy price rises coming down the track for many governments and no other major government is offering this kind of support. But they’re not just about to face a presidential election.

Le Maire: It is first of all, an economic necessity because it is less costly to protect the industrial plants from these huge increases of electricity prices, rather than providing help to the salaries, providing help to those companies because they are threatened by possibility shutdown. I really think that this is the right response, the right economic response to this electricity crisis. I also want to insist on the necessity to have a long term approach. It won’t be enough to have protection given by the French state and by EDF. We also need to have a long-term response based on changes in the electricity market, the open electricity market, because I think that there is a need for changes in the European electricity market. It will be also at the core of the French EU presidency. 

Flanders: What is your advice to other governments who are all dealing with the same issue and they can also see what the potential cost could be of footing the bill for these energy price rises? I think that may be why they are willing to have households really shoulder the burden over the next year. What do you think of the risks of that? If you let households face this kind of maybe 30, 40, even 50% increase in their energy bills? 

Le Maire: First of all, I really think that there is no possibility for our people to have such an increase in their electricity bills, 35 to 40%, when the average electricity bill in France is around 900 euros. That’s something that all the people cannot afford and that’s why there is need for a really strong response. Then I really think that the single fair and efficient response over the long term is based on one single word: independence. We need to be more independent on the production of energy. We need to reduce level of dependency on gas production by Russia and by other foreign states, which means that we have to build both new nuclear plants. That’s the response that we wanted to give President Macron to the risk of this increasing energy prices. And we also have to rely on renewable energies, but the real response is to have more independence on the energy production everywhere in Europe. 

Flanders: Do you think as we look at the longer-term fallout from the pandemic, the one that is most obvious clearly is inflation. And not just energy prices, but inflation that’s come from supply chain issues and potentially also the labor market being quite tight in many places. People changing their attitude to work in some countries. Do you think inflation could end up as a greater political risk to governments than the pandemic itself? 

Le Maire: We have to be vigilant. We have to understand what is behind this increase on prices. And I think that what is behind and what explains the increase of prices is the energy prices. And that’s why the long-term response must be based on more independence on energy production. And then we need to be very careful, very vigilant on inflation. Our assessment remains that this level of inflation remains temporary. But let’s be very clear when I’m speaking about temporarily inflation, I’m not speaking about days. I’m not speaking about weeks. I’m speaking about months. And I think that we would have to live with a pretty high level of inflation by the end of 2022 because of the lack of energy, because of the difficulties in the supply chains, because of the situation in China, which has decided to close its borders for all these reasons. I think that we will have to live with a pretty high level of inflation by the end of 2022. So this is a temporary inflation, but we have to understand that the word temporary means some months and not some weeks, 

Flanders: We have different definitions of transient in the U.S. and people are certainly changing their view of that. If we step back a little bit, you will remember, you will certainly know five years ago, people around the world saw President Macron as Europe’s great liberal hope. He seemed to be this new, very confident blend of the best liberal instincts from the right and the left of French politics, European politics. But now we look at the presidential campaign he’s polling only just ahead of two extreme right candidates, one of which we didn’t even know about a few months ago. Is the conclusion the rest of the world should draw that the middle road President Macron was walking is impassable in today’s climate and just can’t be done. 

Le Maire: No, I think on the contrary, that he is the evidence that there is a path for structural reforms for the improvement of the competitiveness of an economy and for the possibility of giving to every citizen the chance of being successful. Of course, we are facing a very strong position from the extremist parties, but that’s the case everywhere in the Western world. It has been the case in the U.S. It has been the case in Italy. It has been the case in the U.K. So it is the case in every Western country. But the truth is that there is a possibility for this way to be successful. And I’m deeply convinced that at the next presidential election in France, Emmanuel Macron will be successful because he has given the evidence that if we are taking the right economic decisions, we can get some very strong results. Once again, we are on the right path. We should stick to that path because it gives results to the French population. 

Flanders: But just to push back a little bit, those two extreme right candidates are polling between them significantly more than President Macron. And when one looks at the stories and the language from the presidential campaign, it feels like his political response in order to win the election has been to move away from his liberal instincts and to play up perhaps to more of the illiberal or the anti-immigration side of French politics. So, again, from the outside, that seems like quite a dispiriting development that the only way he can succeed is actually by moving away from the liberal vision that he had outlined. 

Le Maire: It depends on what you mean by liberal vision. If a liberal vision means to believe in the possibility for every citizen to build their own success, which is I think at the core of political liberalism, I could share that point of view. If you mean by a liberal approach the fact that there is no need for the state to intervene in the economy, I would not share this point of view. Because the crisis just proved one single thing: We need the intervention of the French state or of the European states to face the consequences of the crisis. And if we have been successful in 2020 and in 2021 to face the crisis, to protect the companies and to protect the workers, and also to have a very quick and sound economic rebound, that’s because the states and the public powers decided to intervene and to give very strong responses to the crisis. 

It was not the case in 2008 and 2010 during the financial crisis. And we were not successful during the last financial crisis. We have drawn the lessons of this financial crisis by asking the French state and by asking European states to intervene on the markets, to protect the companies and to protect the salaries, and it proved to be more efficient. It does not mean that I think that the state would have to intervene in every situation and under every circumstance; it just means that in a period of economic crisis, we need the intervention of the state and we need the support of the states. 

Flanders: We did speak several years ago. You have managed to be finance minister through the whole of President Macron’s presidency, which is quite a rare thing in France. Do you want to stay in your job if you get the chance, or is there a better job in government that you would like?

Le Maire:  There is no better job than being finance minister. And I will just finish by insisting on the necessity of having more stability in French politics. You know, when we are talking about economy, about finance, about coming back to some public finances, about the necessity of having more industry in France, it takes time. And the lesson that I draw from these five years as a French finance minister is that if you want to build something solid for the French nation and for the French people, you need time. Time is of the essence. If you want to be successful, you need more stability in the French politics, 

Flanders: Bruno Le Maire, thank you very much. 

Le Maire: Thank you so much.

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