Keeping up the pressure on Macron is key
The French president’s labour-market policies might worsen the deflationary, regressive cycle
rior to the second round of the French Presidential election, DiEM25 (the pan-European movement of democrats, mostly of the Left, that I helped to found) promised Emmanuel Macron that we would “mobilise fully to help” him defeat Marine Le Pen. This we did — incurring the wrath of many on the Left — because maintaining “an equal distance between Macron and Le Pen,” we believed, was “inexcusable.”
But there was a second part to our promise to Macron: If he “becomes merely another functionary of Europe’s deep establishment,” pursuing dead-end, already-failed neoliberalism, we “will oppose him no less energetically than we are — or should be — opposing Le Pen now”. Relieved that Macron won, and proud of our clear support for him, we must now fulfil the second part of the promise. No “honeymoon” period: We must oppose Macron immediately. Here’s why.
Macron’s electoral programme made clear his intent to continue with the labour-market policies that he began to introduce as former French president Francois Hollande’s economy minister. Having spoken to him about these policies, I have no doubt that he believes in them strongly. For Macron, a true progressive must not only support reforms that strengthen employers’ right to dismiss and manage workers, but equally important are increases in social security for those losing their jobs, training in new skills, and incentives to take up new jobs.
The idea is simple: If employers have more control over how long and how much they pay their employees, they will hire more workers under normal contracts. And the improved social safety net will ensure that workers with the right skills will be available.
Macron’s greatest difficulty will be the same as Hollande’s: Dealing with Germany. The German government — and consequently the Eurogroup of Eurozone finance ministers, which Germany dominates — never misses a chance to castigate the French for their failure to bring the government’s budget deficit below the agreed 3 per cent-of-gross domestic product limit.
Macron has pledged to achieve this by dismissing civil servants, cutting local government spending, and increasing indirect taxes, which ultimately hit the poorest. In any economy afflicted by low and falling investment, cutting government spending and raising indirect taxes is bound to weaken aggregate demand, thus confirming the pessimistic expectations that prevent investors from investing and giving the deflationary wheel another spin.
Closing the loopholes
As if this were not enough, Macron has promised to redress an injustice he feels burdens the low-income, asset-rich French: He pledged to reduce taxes on wealth or assets that do not generate incomes above a certain threshold. Even so, to reduce wealth taxes before closing the loopholes that allow the income-rich (who are often also asset-rich) to pay their share of income tax makes little sense. So what will Macron do when Germany says nein (no)? In fact, the Germans have said so already. According to Wolfgang Schauble, Germany’s Finance Minister, all Europe now needs is to convert the European Stability Mechanism into a European Monetary Fund. In other words, if France wants joint funding, it must submit itself to the same conditionality that wrecked Greece. Martin Schulz, the leader of Germany’s opposition Social Democrats, agrees that no new fiscal institution is necessary, proposing only that France and Germany jointly finance some common investment projects. In other words, nein means nein.
Hollande, lest we forget, also won the French presidency by promising to challenge Germany on Eurozone macroeconomic policy — and then quickly abandoned the fight. If Macron is to succeed, he will need a credible fallback position and a European strategy that he can pursue without German agreement. Such a plan is not in evidence. All we see is a readiness to do whatever Germany demands in advance, including “flexicurity”, austerity, and so forth, in the hope that Germany will then agree to some of his Eurozone reforms before it is too late.
Reasonable people understood that Macron ought to be supported against Le Pen. Now they understand that Macron’s policies will worsen the deflationary, regressive cycle that is Le Pen’s greatest ally. With the election over, opposing Le Pen now means opposing Macron. Yanis Varoufakis, a former finance minister of Greece, is professor of Economics at the University of Athens.