In the aftermath of the second round of the French presidential election, far-right candidate Marine Le Pen campaigned in rural Burgundy to press on a sore spot that has marred opponent Emmanuel Macron’s otherwise positive economic record.
There, a grain farmer told him of his struggles with soaring fuel and fertilizer prices, echoing what French voters are telling pollsters as their biggest priority ahead of the April 24 run-off: the soaring cost of life.
“Another dark cloud is gathering over the heads of the French,” she said, predicting further food price inflation.
The candidate, whose party has focused on immigration issues and is less known for its economic policies, has proposed to solve the problem by eliminating VAT on a basket of food and essential household goods, while reducing the rate of 20 to 5% on electricity and gasoline.
It is one of a series of measures in Le Pen’s plan that would put the France she led on a new economic path, guided by ideas that are more protectionist and nationalist than the business-friendly agenda adopted by Macron.
True to the campaign slogan “Let’s give back their money to the French”, she proposed major tax cuts and new spending. Parisian bar owner Philippe Poitier said his focus on wallet issues won him over. “His ideas sound good, especially the gas tax cuts. We need someone to do something,” he said.
Le Pen’s economic strategy carries risks. Analysts said his program would add 105 billion euros a year to France’s already large public deficit of 161 billion euros for 2021, or 6.5% of GDP.
The economic policies of Macron and Le Pen compared
Macron: Increase the legal retirement age to 64-65
The pen : Maintain the retirement age at 62
Macron: Tax-exempt bonus multiplied by 3 and flexibility improved by the monetization of vacation days
The pen : Salary increase of 10% exempt from employer’s social contribution
Public finances and taxes
• New production tax cuts for businesses and the self-employed
• Inheritance tax reductions
• Remove TV license fees
• Public deficit reduced to 3% of GDP by 2027
• Reduce local government spending
• New leasing system for electric cars
• Simplify benefits and limit fraud
The pen :
• Income tax exemption for assets under 30 and corporate tax exemption for entrepreneurs under 30
• Inheritance tax exemption for lower and middle class families
• Privatize state-supported television and radio
• Restoration of the ISF on financial assets, exemption of housing from the tax base
• Renationalize highways to reduce tolls by up to 15%
• Reduction of VAT from 20% to 5.5% for energy
• Give preference to the French for social housing and jobs, and reduce allowances for immigrants
Source: Barclays Economic Research, candidate programs
Aspects of his agenda, such as a proposed referendum on immigration that would affirm the primacy of French law over European law, could also create a clash with the EU, which would have repercussions on financial markets. Another flashpoint is his stated wish for France to cut its annual contribution to the EU budget by 5 billion euros.
“When Hungary or Poland break European law, there is strain on the currency and the markets, but it’s manageable,” said Philippe Gudin, economist at Barclays. “But if that were to happen with France, one of the founding members of the EU, it would be much more problematic.”
Gudin estimates that Le Pen’s plans would redirect around 42 billion euros, or 1.7% of GDP, to the French public. But if his presidency sparked a fight with the EU followed by a debt crisis like in Greece a decade ago, ordinary voters would end up paying the price, he said.
Under a Le Pen presidency, income tax would be scrapped for everyone under 30 and interest-free loans of up to €100,000 would be offered to young families, with debt forgiven if they had three children. A French sovereign wealth fund would be created to promote an economy centered on what she calls “localism” as opposed to Macron’s “globalism”.
Unlike Macron who wants to raise the retirement age, she would keep it at 62, but lower it to 60 for those who started working young.
While Le Pen and Macron say their plans would not increase the public deficit, the Institut Montaigne think tank found that both would make it worse because they overestimated savings and underestimated costs.
For example, Le Pen said that excluding immigrants from benefits such as social housing and health care would save €18 billion, but the Institut Montaigne estimates it would be half of that. Macron’s program would add 44 billion euros to the public deficit.
The Medef employers’ federation, which has backed Macron, has warned that Le Pen’s economic plan will cause France to lag behind its EU neighbours.
Others doubt that Le Pen will be able to implement his promises. It all depends on whether his party, the National Rally, wins a majority in the June legislative elections.
The prospect of a Le Pen victory has already rattled the financial markets. After Macron’s lead in the polls narrowed ahead of last Sunday’s first round, the extra yield France is paying to borrow against Germany – the de facto eurozone haven – has hit its highest. high level since the start of the pandemic.
The spread on 10-year bonds reached 0.56 percentage points, still below the nearly 0.8 percentage points reached during Le Pen’s last presidential campaign in 2017, before falling slightly once It was clear that Macron had a solid lead in the first round. The euro also rebounded.
The latest polls predict that Macron will win the second round with 53% of the vote.
Vincent Mortier, chief investment officer at Amundi, the asset manager, said markets seemed “pleased with a Macron win, although the likelihood of a non-market-friendly Le Pen win is not negligible. “.
One difference between Macron’s and Le Pen’s economic policies is that he places more emphasis on promoting a vibrant labor market, arguing that this is the best way to secure purchasing power. His labor reforms have helped reduce unemployment to around 7%, the lowest levels since 2008.
Still, voters seem unimpressed, perhaps because inflation fears have taken over, although France’s inflation rate of 5.1% year-on-year is the lowest in Europe, according to Eurostat. In a recent Ipsos poll, slightly more respondents, 25%, said they trusted Macron to handle the issue of living standards, compared to 21% for Le Pen.
Irdrielle Mounet, a student in Paris, said she was skeptical about the impact of the presidential election, but was ready to vote for change. “Le Pen says she focuses more on helping young people – so maybe it’s worth a try.”
Additional reporting by Sarah White in Paris