Emmanuel Macron Gets a Stronger French Economy But No Voter Love

(Bloomberg View) -- When Emmanuel Macron was elected French president, the conventional wisdom was that he'd only survive if his policies brought tangible economic growth. So here's the paradox Macron faces this year: While growth is picking up and many other economic indicators are finally turning positive, his critics have become more numerous. Indeed, his popularity fell during the past month by as much as five percentage points. 

The year could not have started better for the French government on the economic front. The European Commission recently revised upward its growth previsions, to 2.0 percent for 2018 from 1.7 percent, and 1.8 percent for 2019 from 1.6 percent. Although unemployment is still high by European standards, it has fallen to 8.9 percent, the lowest level since 2009. The government claims the budget deficit should be 2.8 percent of gross domestic product in 2018, fulfilling Macron's promise to meet his European Union obligations by staying within the 3 percent limit. (The independent Court of Auditors has expressed doubts about that forecast, but even a small overshoot in spending would still be a political victory in a country that has not kept its spending promises in decades.) 

For all the good economic news, there have been many debates in the media and elsewhere about who will benefit from this newfound growth. The OFCE, a French economic think tank, recently published a report showing that although growth is picking up, most people won't feel the benefits. Overall, taxes on the middle class will increase in 2018 -- mostly because of  indirect taxes on cigarettes, fossil fuels and diesel -- before declining in 2019.

For the poorest, new government spending does not compensate for the hit from indirect tax increases. The richest 2 percent, however, will fully benefit from the effects of the new flat tax on capital gains and the reform of the ISF, a special tax on the wealthiest. The OFCE estimates that 42 percent of the fiscal gains from Macron’s first budget will benefit the wealthiest 5 percent of households. Moreover, budget cuts on public services will also hit low-income French the hardest, and at a time when there are rising fears about the quality and availability of social services from health care to education to employment services. 

There are other reasons for lingering skepticism too. France is a country where distrust in figures of authority, whether politicians, scientists or the media, is high. It will take a lot more evidence, and more time, for Macron to convince people that he's delivering lasting improvements in their lives. Given that there is often a lag between when indicators actually improve and when people start to feel their impact, it's too early to expect Macron to benefit from the better numbers yet.

A bigger problem for Macron is changing public priorities. A survey conducted in January by Kantar Sofres found that improving purchasing power has become the main concern of French people (51 percent), above employment (43 percent) and tax cuts (40 percent). Fighting terrorism and dealing with the immigration crisis are now secondary. 

But in addressing these priorities, Macron faces a deeply skeptical French public, burned by the undelivered promises of previous governments. Francois Hollande’s tax increases between 2012 and 2014 added insult to the injury of Nicholas Sarkozy's 2007 undelivered promises to increase purchasing power. Voters in France always suspect that the government will take back with one hand what it has given with the other. The decision by Macron’s government to postpone some of his tax cuts has reinforced fears that the middle class will once again be forgotten. The fact that the government chose to cut taxes on the rich and raise taxes for pensioners did nothing to assuage those fears. Macron's low numbers may have as much to do with this learned skepticism than his own performance.

In response, the government has repeated its promise to increase purchasing power and improve living conditions for all, not just the wealthy. How well he succeeds in getting that message across in the coming months could determine Macron's ability to implement reforms needed to further reduce unemployment and make higher rates of growth sustainable. French voters are not known for their patience. Today's positive economic numbers will matter little if the he doesn't deliver the inclusive growth they demand.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chloe Morin is a communications consultant with the think tank Fondation Jean Jaures.

To contact the author of this story: Chloe Morin at chloe.morin@gmail.com.

To contact the editor responsible for this story: Therese Raphael at traphael4@bloomberg.net.

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