Europe Politics

France's Macron seeks to show he's no lame duck as pension discontent rumbles on

Key Points
  • French President Emmanuel Macron burned through huge amounts of political capital and personal popularity to achieve his long-held ambition of raising the retirement age.
  • Macron believes "he must prove that he is not doomed to domestic impotence within the next four months," said Mujtaba Rahman, managing director for Europe at Eurasia Group.
  • He will seek key wins on defense spending, a green industry bill and migration, analysts said — though some will prove more challenging than others.
France's President Emmanuel Macron looks on in a meeting with JP Morgan CEO during the 5th edition of the "Choose France" Business Summit, in Versailles, southwest of Paris, on July 11, 2022.
Ludovic Marin | Afp | Getty Images

While French President Emmanuel Macron was in Germany for dinner and alliance-building talks with Chancellor Olaf Scholz this week, more than 200,000 protesters were on the streets at home to oppose one of his flagship domestic policies.

Before marking six years in office on May 14, Macron managed to pass a bill that will see the retirement age for most workers rise from 62 to 64, among other measures. Reforming the pension system was a longstanding pledge of Macron's, but enacting it nearly toppled his government, sparked weeks of strikes and demonstrations, and caused his already-shaky popularity rating to plummet.

Ongoing efforts by opposition politicians to thwart the bill faced another blockage this week, and it looks most likely to be secured into law in September, as planned.

Union-led protests will no doubt continue but with the dust almost settled around the issue, the president is looking at what's next for the four years left of his term (he is not allowed to run for another consecutively.)

Around 8,000 demonstrators took to the streets of Toulouse, France, on June 06, 2023, protesting against the government. "Black bloc" protestors, masked individuals who are frequently seen in clashes with police, at times took over the head of the procession in the middle of other demonstrators.
Nurphoto | Nurphoto | Getty Images

He has already demonstrated that foreign policy and forging alliances on overseas trips will be a key focus, from China to Ukraine to the U.K.

At home, Macron faces the question of whether he has used up too much political capital to enact what is left of his domestic agenda, and how he will navigate a bitterly-divided Parliament.

He has failed to build effective alliances beyond the conservative Les Republicains — something its lawmakers, not all of whom supported the pensions bill, are very aware of, said senior lecturer in the economics department at Lancaster University, Renaud Foucart.

"They know Macron has no alternative than to rely on them, making it almost impossible to develop the centrist domestic project," he said.

Future agenda

Foucart said one case of this may be Macron's long-postponed immigration law, which combines a conservative angle — making deportations easier — with a more progressive one that aims to make it easier for undocumented immigrants and asylum seekers to find work. The bill has met with strong opposition on the left and right, and Les Republicains presented its own, more right-leaning proposal last month.

France's Macron seeks to turn the page on pension reform anger with primetime address
France's Macron seeks to turn the page on pension reform anger with primetime address

Mujtaba Rahman, managing director for Europe at consultancy Eurasia Group, said in a research note that Macron likely believes that to avoid being a "lame duck" for the next four years, "he must prove that he is not doomed to domestic impotence within the next four months."

He may hope for a relatively easy win in the form of a planned 30% boost to defense spending and a program to modernize military equipment, Rahman said, since this is largely only controversial on the left of the political spectrum.

Another key focus for Macron and Finance Minister Bruno Le Maire is a green industry bill that Rahman also believes will likely gather enough support to pass in the coming months.

Presented to Parliament on May 16 and set for a first reading on June 19, this is a broad effort toward a decarbonized "reindustrialization" of France, with measures including billions in grants for green industrial projects, green energy projects and cuts to red tape for setting up new factories.

Macron has concurrently been on a push to attract electric vehicle factories as Europe scrambles to increase capacity, offering tax credits for environmentally-friendly investments, and pushing the EU to get competitive with the U.S. Inflation Reduction Act; as well as courting executives — including Elon Musk — to increase foreign investment in the country.

More controversial, adds Rahman, is the "dose of protectionism" in Macron's bill that will see green subsidies, including for consumers who buy electric cars, only applied to goods that meet EU environmental regulations, excluding many China-produced products.

French trade minister: Relaunching relationship with UK amid Inflation Reduction Act, concerns with China
French trade minister: Relaunching relationship with UK amid Inflation Reduction Act, concerns with China

While he has united factions of French society including unions, the left and the far-right against him, Macron has economic accomplishments to point to, according to Holger Schmieding, chief economist at Berenberg.

"France is now a much better place to invest and create jobs. It is now well ahead of Germany for job creation, start-ups and business investment. This is largely attributable to Macron's agenda," Schmieding said, adding France was replacing Germany was the most dynamic major European economy.

Macron will continue to roll out the red carpet to investors, Schmieding said, as well as generating a significant rise in green investment over time.

Few friends

Still, the coming years will be an uphill struggle for Macron politically, analysts said.

"Macron will continue to push a pro-business agenda, as seen in his reforms to labor laws, but further measures will likely be piecemeal and require extensive negotiation to pass," Zandra Kellert, associate director at consultancy Control Risks, said.

His focus, she said, will be on leadership within the EU, forging relations overseas, pushing regulatory changes at the EU level, and boosting French businesses as Europe takes a more protectionist tilt.

French President Emmanuel Macron and Chinese President Xi Jinping shake hands at a Franco-Chinese business council meeting in Beijing, China April 6, 2023. 
Pool | Reuters

Recent expenditure of his political capital will mean he is reluctant to use the executive powers he used for both the pensions bill and most recent budget, Kellert said. "He would like to pass tax cuts and reform bureaucratic processes to make them more business-friendly. However, such measures are likely to be watered down before implementation," she added.

Julien Hoez, a political analyst and consultant who has worked with Macron's Renaissance party, said the president had not been left as a lame duck and would still be able to work constructively to accomplish some of his agenda.

On a popularity level, he said, a consistent issue for Macron is that he is seen by the public as condescending — something he's attempting to slowly change through media appearances where he appeals directly to the people.

While the pensions overhaul has eroded his image with those who fiercely oppose the measure, Hoez said many people were also unimpressed with the rowdiness of opposition lawmakers during the process; and that a newly-announced 2 billion euros ($2.14 billion) in tax cuts aimed at the middle class could garner Macron some favor.

His government will also be under pressure to bring down inflation, which has fallen to a 12-month low but remains well above target, ahead of the test of European parliamentary elections next year.

Rahman of Eurasia Group said that in the coming months, Macron was likely to "win some" — in defense and his green industry bill — and "lose some," on migration.

"This will set the pattern for his remaining four years in office: he will not be completely powerless or hamstrung, but he will have to choose his battles carefully," Rahman said.