France gets its chance to lead Europe
Germany's fragile government and the United Kingdom's upcoming departure have created an opportunity for France to lead the European Union.
In May 2017, Emmanuel Macron became the president of France; two-and-a-half years on, he has the opportunity to become the effective leader of the European Union. Indeed, France stands on the cusp of a greater role in the bloc as other movers and shakers deal with their own issues: Germany, which has been the European Union's de facto leader for at least a decade, is now too focused on domestic issues to direct the Continent, while the United Kingdom, Europe's second-largest economy, is on its way out of the union. What's more, the French economy is growing at a decent pace, giving Paris the legitimacy it lacked in the past. But the very same factors that have created an unusual opportunity for France will also constrain its room for action as Macron contends with foreign and domestic opposition to his vision. Despite Macron's diplomatic efforts, the impact of Paris' push to reshape the Continent on areas ranging from defense to finance is more likely to be modest than monumental.
The Big Picture
In part because of Germany's weak government and Brexit, France is poised to elevate its role in European Union affairs with an eye to promoting a more selfsufficient and integrated Europe amid greater competition with the United States, China and Russia. Nevertheless, France will also face significant headwinds, as not everybody in Europe is willing to follow its lead.
A Waning Germany
During the past decade, Germany's robust economy made it the leading voice in the European Union. Berlin was careful enough to include Paris in most of its decisions so as to preserve the image of Franco-German coleadership in Europe (given its 20thcentury history, Germany is worried about cultivating the perception that it rules the Continent alone). But particularly during the peak of the financial crisis in the late 2000s and early 2010s, a waxing Germany and a waning France meant that most of Europe's crucial decisions (from the authorization of bailout programmes for Southern Europe to the introduction of eurozone reforms) required Berlin's blessing to take place.
The geopolitical environment in Europe is now changing, creating opportunities for a more active France. Germany is governed by a fragile alliance between the centerright and center-left, while Chancellor Angela Merkel's stated intention to quit politics after her current term ends in 2021 has made her a lame duck. This has left a big political vacuum at the heart of Europe that Macron is trying to fill.
Macron's economic policies (a balancing act that combines structural reforms with high levels of public spending) are starting to bear fruit. The French economy is now one of the fastest-growing in Western Europe, and France's gross domestic product expanded at a much faster pace than Germany's in both 2018 and 2019. Moreover, unemployment has fallen to close to 8 percent, the lowest rate in a decade. Since the start of his presidency, Macron has had two complementary goals: reform the French economy to make it more competitive and use France's improved economic environment to elevate Paris' role in European affairs. Now that Macron has demonstrated his domestic credentials as a reformist, he is actively promoting his vision of a more integrated European Union that is less reliant on nonEuropean actors.
In the meantime, Brexit means that the European Union will lose one of the main advocates for deregulation and market liberalization in Europe, as well as a vocal defender of the interests of the EU countries that are not in the eurozone and a bridge between Europe and the United States. With the United Kingdom's departure, the balance of power in the European Union will move to the south, as the relative weight (in terms of population and GDP) of countries in the Mediterranean will increase to the detriment of those in Northern Europe. France plans to take advantage of this southward shift by proposing measures to increase EU intervention in the economy and adopt a more protectionist approach to trade and foreign investment – views that are more closely aligned with those in Southern Europe than with those of the United Kingdom and some of its northern peers.
France's Fetters
Ironically, the same factors that foster opportunities for France will also limit its room to move. A weaker Germany does not necessarily mean that France can impose its views on EU affairs; on the contrary, a paralyzed Berlin is more likely to lead to a paralyzed bloc rather than a more vigorous one. After all, Germany remains the largest economy in Europe, a net contributor to the EU budget and an influential voice in Northern and Eastern Europe. Without Berlin's acquiescence, there is little Paris can achieve when it comes to structural reform in the bloc. At the same time, governments in Northern Europe are concerned about the risks of a weak Germany, and countries like the Netherlands have been very active in their fight against France's proposals for deeper economic integration and greater financial risk-sharing in the eurozone.
Countries in Central and Eastern Europe are also concerned about France's views for the Continent, albeit for different reasons. Paris has demanded greater military integration in Europe, arguing that the Continent cannot depend on NATO (recently, Macron even went as far as to declare the alliance "brain-dead"). But Central and Eastern European members still view NATO, and the United States in particular, as their ultimate protector against foreign aggression, meaning they oppose any plans that could threaten their ties to them. Thus, while the European Union has increased funding for joint projects in the defense industry and sought ways to reduce redundancies in military procurement in recent years, the creation of a true, "European army" is still far away.
At the same time, many EU countries and institutions are also concerned about France's somewhat elitist views on EU integration. Macron has repeatedly suggested that a "vanguard" of Western European countries should move ahead with the process of integration, even if that means leaving some countries in the east behind. While distinctions between EU members already exist (for example, some are members of the eurozone and others are not), the idea that this separation could become formal contravenes the principle of a fully integrated Europe – a goal that has shaped the bloc's policies for decades.
Such an attitude illustrates one of the key differences between France and Germany, as Berlin is more willing than Paris to tolerate a slower pace of reform to make change more acceptable to a larger number of countries. For Berlin, the position makes sense; after all, most of the countries that rapid, French-led integration might leave behind are in
Germany's backyard, and Berlin fears that they would become poorer, less democratic and more open to influence from non-EU actors if the bloc sends them the message that it no longer wants them.
The French government also faces problems at home. Paris reformed labour legislation to make it more flexible, introduced rules that make it more difficult to claim unemployment benefits, as well as cut taxes, especially for the wealthy. Some of these measures have been unpopular, fomenting social unrest that peaked in late 2018 with the "yellow vests" protests. In response, Macron cut taxes for low and middle incomes and increased public spending, accepting that the reduction of France's fiscal deficit would be much slower than originally anticipated – a none-toominor deal in a country where public debt represents around 100 percent of GDP.
Macron's concessions notwithstanding, the ground remains fertile for unexpected social unrest because there are large segments of the French population that are not feeling the benefits of the president's policies. Youth unemployment, for example, still impacts around 20 percent of the active population under 24 (the fourthhighest rate in the eurozone). Meanwhile, a French think tank recently reported that the biggest winners from Macron's tax policies were actually France's richest 1 percent. Opinion polls show that just a third of the electorate supports Macron's policies, which reveals that there is a disconnect between France's generally good macroeconomic performance and the domestic perception of the government's actions.
Macron's next big reform proposal, a plan to simplify the pension system, will probably be approved. Indeed, his party controls a majority of seats in the National Assembly and the unions are divided. But the prospect for protests will remain high, and as the global economy slows down, France's high levels of public spending (a central factor in keeping social unrest under control) will become increasingly harder to sustain. Moreover, a significant sector of the electorate, both on the farright and the far-left, harbors Euroskeptic views that clash with Macron's prointegration ideals.
France Cannot Lead Alone
The first half of Macron's term included a combination of victories and defeats, both at home and abroad. Macron succeeded at implementing reforms that appeared difficult when he took office, but it came at the expense of rising social unrest, decreasing popularity and compromises on fiscal policy that could create problems in the future. At the European level, Macron has pushed for what he has dubbed "strategic autonomy" – that is, a European Union that is more self-sufficient and better-equipped to deal with the challenges presented by global powers such as the United States, China and Russia. But, just like with domestic policies, Macron's push prompted resistance in the north, deep skepticism in the east and irritation in the bloc's governing institutions.
Macron's determination to introduce a budget for the eurozone provides a stark example. The French leader only managed to secure a watered-down deal, primarily due to opposition from Northern Europe. Whether this represents a victory or a defeat for Paris is a matter of political interpretation, because one could argue that a small budget with limited vision is better than no budget at all. But the debate around its creation showed that, for all his euphoric rhetoric, Macron is not in control of the bloc's policy process.
Similar results beckon during the second half of Macron's presidency. Germany will remain in a state of semiparalysis, meaning deep reforms in the eurozone are unlikely to occur. In the meantime, Northern Europe has proven capable of organizing itself in an antiMacron camp, while Eastern Europe – its current divisions notwithstanding – could still block Paris' proposals if push comes to shove. At the same time, some of France's natural allies in the south (Italy and Spain) have too many domestic problems to effectively shape EU policy. And at home, the lingering threats of social unrest and strong Euroskeptic sentiment will restrict the government's room for action. Still, France is the only country in the European Union with the determination and energy to wake the bloc from its lethargy – even if it might ultimately have to settle for a combination of half-victories and partial defeats.
Adriano Bosoni is Senior Europe Analyst at Stratfor “France Gets Its Chance to Lead Europe” is republished under content confederation between Financial Nigeria and Stratfor.
The first half of Macron's term included a combination of victories and defeats, both at home and abroad.