France's economy is doing well. But no one believes it. Emmanuel Macron is doomed

France is a country that embraces intellectual opposites. It loves both Cartesian rationalism and homeopathic quackery, it  hates
wealth yet specialises in luxury, and its egalitarian republic oftenfeels like a monarchy.

Now the French are appropriately plunged into a bout of paradoxical pessimism, bemoaning what’s been called the worst political crisis since the Algerian War as social unrest festers, consumer confidence sinks and President Emmanuel Macron’s approval ratings tumble to all-time lows after an unpopular hike to the retirement age to 64 from 62. Yet the hard data suggest things are... actually quite good.

Last week’s figures show France’s economy rebounded during the first three months of the year — up 0.2 percent, better than Germany though behind tourism-driven Spain — even as images beamed around the world showed police clashing with protesters, garbage piled high on the streets of Paris and Bordeaux’s town hall set on fire. The violence ended up canceling King Charles III’s state visit.

Other positives: The jobless rate is at its lowest in 15 years, companies are investing and wages are rising 4-5 percent, according to the Medef employers’ lobby. Current inflation at 5.9 percent and rising interest rates are clearly eating into big purchases like white goods and automobiles, but inflation is below the European average while pandemic savings remain high and are flowing into interest-rate-bearing accounts at a record rate. Paris is holding onto post-Brexit jobs won from London.

Pension protesters’ placards bearing slogans like “commute, work, die” belie the post-COVID rebound for leisure: After last year’s record profits at railway operator SNCF and a blowout winter ski season, six out of 10 French people are planning summer getaways. Conversations in restaurants often involve a lengthy analysis of la crise nationale over main courses, before complaining over dessert that travel spots are sold out.

France isn’t the only country to have an upbeat economy amid political gloom — the US also experienced a “vibecession” last year — but the ability of Europe’s No 2 economy to avoid recession while reforming itself matters hugely amid the shock of the energy crisis and war. This isn’t just about LVMH SA or Hermes International’s ability to sell handbags to the Chinese — which is why the Paris stock market has been among the world’s best performers — but also about France’s debt pile stretching to protect the worst-off from inflation’s rise and keep income inequality low. Surveys suggest that the French are gloomy about the country’s prospects, but satisfied with their own lot in life — another paradox.

This is where the wrinkle in the French story lies. Macron, who is trying to revive his flagging presidency with a 100-day “cooling-off” period and tax cuts for the middle class, knows his economic luck may soon run out as rate hikes take hold just as his political capital is depleted. His abrasive personality and condescending manner, coupled with schoolboy political errors, mean he can’t travel across France without being greeted by clanging pots and pans. Even the Parisian elite bemoan his Parisian elitism, comparing him to Barack Obama, who famously talked about the price of arugula to Iowan farmers.

Macron’s lack of an absolute parliamentary majority and inability to run for a third term has made him look like a spent force even within his own party and allowed far-right nemesis Marine Le Pen — France’s Donald Trump — to gain in popularity by ditching radical ideas like Frexit. The French electorate’s contradictions are on full display, with polls showing regret over Macron’s re-election precisely because he’s keeping his reform promises. “Macron is hated because he did what he said he would do,” as Jean-Marie Colombani, Le Monde’s former editor, put it.

This has led to increasingly grandiose calls for change in France, including a less presidential “Sixth Republic,” and fresh generational thinking after the stuffy era of Covid lockdowns and a rightward shift in voter attitudes. Macron’s immediate priority should be more precise: To build a dependable parliamentary majority for future reforms by rolling his sleeves up and finding a workable coalition with a policy road-map rather than ad-hoc vote-gathering. Later on, instead of a Sixth Republic, Macron should eventually aim to change ill-advised electoral terms designed two decades ago that discourage coalitions.

If Macron fails to keep the French economy on a reforming track, the danger lies with the real powder keg that’s far less visible than pension protests: Government debt worth over 110 percent of gross domestic product. Fitch Ratings’ recent downgrade of France puts it in the same bracket as the UK; Paris has dodged the chaos of Brexit and last year’s Trussonomics debacle, there’s little room for error in its approach to making public spending more efficient while trying to invest for the future. As central banks roll back bond-buying and populist clouds gather, France’s ability to keep borrowing and spending amid demographic decline without market pressure may be one paradox too many.

Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. Views are personal, and do not represent the stand of this publication.

Credit: Bloomberg