What Macron’s State of the Union address means for France

Key Points
  • French President Emmanuel Macron promises a referendum if lawmakers do not back his reforms.
  • The President aims to cut the number of lawmakers by a third.
  • Prime Minister Edouard Philippe will address the National Assembly Tuesday to outline the government's reform plans in greater detail.
French President Emmanuel Macron walks through the Galerie des Bustes (Busts Gallery) to access the Versailles Palace's hemicycle for a special congress gathering both houses of parliament (National Assembly and Senate), near Paris, France, July 3, 2017.
Etienne Laurent | Reuters

French President Emmanuel Macron vowed Monday that he would move to a public vote if lawmakers did not move quickly enough to back his ambitious reform agenda.

In a rare address to both houses of parliament which echoed the U.S. State of the Union address, the newly-elected president said that he planned to cut the number of lawmakers by a third in order to drive ahead with the overhaul plans which helped him ride to victory in May.

This would reduce the number National Assembly members from 577 to 385 and the number of Senate members from 348 to 232.

He then told the almost 1,000 senators and MPs present at the palace of Versailles that if his proposed changes did not receive parliamentary approval within a year he would take the decision to a referendum.

Why call a referendum?

The purpose of Macron's proposed plebiscite is twofold: it demonstrates the urgency with which he hopes to implement change and it sends a clear signal to the public that their voices will be heard.

"He's playing a game with the parliament, with the Senate, to show that he is serious about implementing reforms," Antoine Lesne, head of SPDR ETF Strategy at State Street Global Advisors, told CNBC Tuesday, noting that the pledge was not binding.

Macron's speech in Versailles intended to add to his stature: State Street

Macron also promised to add a dose of proportional representation and introduce petitions to get key topics discussed in a bid to give more power to the people.

"The people on the street want something different and he hears that," Lesne said. "He wants to show that he is listening to the people."

The last time France held a referendum was in 2005, when it voted against creating a consolidated constitution for the entirety of the EU by a majority of 55 percent.

The move to hold a vote which was ultimately rejected spawned criticism of the then-President Jacques Chirac in much the same way it did for former British Prime Minister David Cameron and former Italian Prime Minister Matteo Renzi, who both backed failed referenda.

What happens next?

Arguably of greater importance is the speech due to be made by French Prime Minister Edouard Philippe to the National Assembly later Tuesday.

He is expected to fill in the gaps left by Macron and provide further details of his government's overhaul agenda, including labour market reforms, tax revisions and new security measures. Already Macron has vowed to lift France's state of emergency, in place since the Paris attacks of November 2015, this autumn but gave no more clarity.

Mayor of Le Havre Edouard Philippe speaks as he presents the candidates for the 'La Republique en marche' party ahead of the June parliamentary elections
Charly Triballeau | AFP | Getty Images

Known as a 'general policy statement', the speech may also conclude with an optional confidence vote.

This is risky as failure by the National Assembly to endorse Philippe's statement would lead to the collapse of his government under the French Constitution. However, validation would provide the government with a stronger mandate to drive ahead with reforms.

The government may be willing to take this gamble given the broad support Macron's La Republique En March (LREM) movement received in presidential and parliamentary elections this year.

However, analysts have suggested that LREM's popularity among lawmakers may not be as far reaching as hoped and such a vote could be unwise.

"You've had two consecutive presidents now who have come in with a grand reform agenda and have got absolutely nowhere. Macron looks like maybe he'll be more successful but his party is already a coalition, he's already taken from the left and the right," James Athey, global fund manager at Aberdeen Asset Management, told CNBC Tuesday.

"There really isn't much of it that you can really say, hand on heart, the entirety of his recently cobbled together party are really going to go for."

Philippe is due to make his speech at 3pm C.E.T. Tuesday.

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