Hard-left MP is new chief of finance in French assembly

Loss of parliamentary majority scuppers president’s pledge to rein in public debt

THE new chairman of France’s powerful parliamentary committee on finance is a former Trotskyite who believes in smashing the “Thatcherite neoliberal” order.

Rivals fear Eric Coquerel, 63, could use the post to expose the tax details of the wealthy and the country’s business elite for political gain. The MP is one of the most senior members of Leftist firebrand and presidential “third man” Jeanluc Mélenchon’s France Unbowed party. Mr Coquerel’s appointment is the latest sign of the growing clout of radical parties after Emmanuel Macron’s centrist Together alliance lost control of parliament in elections last month.

On Wednesday, Marine Le Pen’s hard-right National Rally party obtained two assembly vice-presidencies. The finance committee vote was keenly watched as the body has extensive powers, including oversight of the French budget and the ability to order impromptu checks in ministries to see how the state spends public money.

Crucially, its president can also gain access to the confidential tax declarations of companies or individuals.

While he cannot publish these, in the run-up to the vote Mr Coquerel’s rivals warned there was a risk that a Leftist radical could be tempted to breach this rule for political gain. Mr Coquerel has insisted he has no intention of ordering any “individual witch hunts”.

“I embody a real opposition to the system and the end to Thatcher’s ‘there is no alternative’,” he said. “We defend a programme that breaks with neoliberalism but we know how to do so within the framework of democracy.”

Emmanuel Macron’s grand bargain with Germany has unravelled. He no longer has the political credibility to rein in France’s chronic fiscal deficits or to stop the national debt ratcheting further into the danger zone.

Five years ago he swept into power as the reformist Wunderkind, touting his book Revolution and vowing to turn France into Europe’s start-up nation. It looked as if a French leader might finally take a chainsaw to the 3,000-page code de travail (labour law) and a thicket of 360 separate taxes dating back to feudalism.

The core pledge was to restore spending discipline in France after 11 years in breach of the EU’S Stability Pact, again making Paris a fit partner for Berlin in joint management of Europe’s economic system.

In recompense – he hoped – Germany would relent on Europe. Berlin would cross the fiscal Rubicon after two decades of foot-dragging. It would accept the need for a permanent EU treasury with tax-raising powers, deemed imperative for the long run viability of monetary union.

Little has come of all his plans. The proposal to raise the retirement age from 62 to 65 – the sine qua non of fiscal cleansing – never happened, though he had a fat parliamentary majority. He capitulated to the street protests of the gilet jaunes, and then had the cover of Covid and the invasion of Ukraine to keep putting off hard choices.

“France is still stuck in its infernal equation: it is the country that taxes the most, that spends the most, and that works the least,” said Agnès Verdier-molinié, head of the French Research Institute on Public Administration and Politics.

By the end, Macron was handing out pre-electoral largesse with Peronist abandon, including state subsidies on gas and electricity that tell the French people – rich and poor alike – that Vladimir Putin’s energy war scarcely concerns them.

Whatever chance Macron had to grasp the nettle in his second turn vanished with the parliamentary elections. What the French people gave him in presidency, they emphatically took away in the Chamber of Deputies.

What remains is the rising trajectory of French public debt, to the dismay of François Villeroy de Galhau, governor of the Bank of France. “It is an illusion to think that our debt has no cost and no limits,” he said.

It is hard to believe that France had a lower debt-to-gdp ratio than Germany as recently as 2007: 64pc viz 65pc (according to IMF data). This year France will be at 113pc: Germany at 71pc. The IMF’S Fiscal Monitor forecasts that the gap will widen relentlessly thereafter.

“We must bring the debt back below the level of 100pc. Every 1pc rise in interest rates will cost 40bn a year extra in interest payments within 10 years,” said de Galhau.

He might as well berate the moon. The IMF says France’s cyclically adjusted fiscal deficit will still be 3.2pc in 2024 even under Macron’s stated plans (fiction at this point), by which time it will be zero in Germany and 0.9pc in the UK.

Macron has clung to his fiscal doctrine of “whatever it takes” for longer than most other OECD states. Verdier-molinié says this has opened a Pandora’s box and polluted the national debate. People have lost their sense of limit.

“Every minute now counts in the effort to restore our country’s credibility. And let us not commit the error of thinking that the European Central Bank can save us,” she said.

Public spending remains stuck at 57pc of GDP, and one thing made absolutely clear in the bumper vote for hard-left and hard-right is that the country is in no mood for austerity. Every line item of the French social model is sacred. Jean-luc Mélenchon and Marine Le Pen – twin tribunes of the revolt – both think the welfare state should be even bigger.

Prof Brigitte Granville, a French economist at Queen Mary University of London and author of What Ails France?, said her country was largely spared the ravages of the eurozone debt crisis in 2011-2012. But its debt profile has since moved closer to the Club Med periphery. “This time France could get hurt. You can already see the first warnings in the risk spread,” she said.

The spread in French 10-year bond yields over German Bunds has almost doubled this year to 54 points, chiefly since the ECB flagged an end to bond purchases – a treacherous moment that will expose sovereign states to the chill winds of the market.

Macron’s implicit bargain with Germany and EU elites five years ago was that he would ram through a Thatcherite shake-up, sugared by cultural Leftism. It was to be a Gallic variant of Gerhard Schröder’s Hartz IV agenda in the early 2000s, the reforms that propelled Germany from sick man of Europe to lean competitor, with help from an undervalued synthetic deutschemark within the internal structure of the euro.

Prof Granville said the gamble has failed. Macron has made it easier to hire and fire, although his Nordic “flexi security” model would not look flexible to the Danes. He has decentralised wage bargaining: firms are no longer quite so chained to trade unions that make up less than 8pc of the workforce.

He has abolished the wealth tax, pleasing the financial elites that put him in power. “But he didn’t lower taxes on production, which is the reason why (structural) unemployment is so high in France,” she said.

The suffocating bureaucracy and bewildering nexus of overlapping bodies is mostly untouched. The plan to cut the public payroll by 100,000 has been shelved.

Macron’s grand bargain implied the mutualisation of legacy debts in the EU and therefore the switching of French obligations onto Germany’s credit card, and there lies the rub. He did secure Berlin’s consent for joint debt issuance for the €800bn pandemic Recovery Fund, but legally that was a one-off initiative.

The French calculation was that this fund would evolve into a Hamiltonian “fiscal entity” over time, by the Monnet method of EU creepage. That may yet happen but fiscal backsliding and the prospect of a semi-ungovernable France for the next five years greatly lengthen the odds. “The German Ordoliberals (hardliners) are back,” said Prof Granville.

Macron prefers to ignore the message of the elections. In a peevish speech he rebuked voters for inconsistency, seeming to fault them for giving him a presidential mandate on what he called a clear policy manifesto, and then failing to validate this with a parliamentary majority. But the French people did not elect him for his programme. They voted to stop Marine Le Pen and her National Rally attaining power.

He said opposition parties must now come forward with proposals on how they will help implement his plan. There speaks the unchastened Jupiterian president. His plan?

The parties have so far ruled out any coalition. Macron will have to negotiate every law, text by text, line by line. Yes, parliament will agree to his cost of living package in July. Everybody loves largesse. Beyond that it is a minefield.

He cannot rule by decree – the infamous 49.3 – because use of this tool has been restricted, and he would be at constant risk of a no-confidence vote.

The German political class know in their bones where this is going. They know that Paris will not get its fiscal act together this decade.

They know that their country is being led by the nose into a vast Transferunion with an enlarged southern Europe that now includes France, and that German taxpayers are expected to do for some 200 million people what they did a generation ago for 16 million of their cousins in East Germany. That is a big ask.

There is much ruin in a great nation – to borrow from Adam Smith – and France indisputably remains great. It is Europe’s agricultural superpower. It has not succumbed to anti-nuclear hysteria. It did not make a Faustian pact for Putin’s gas. These are qualities now in sharp relief. It has armed forces that amount to more than pensions and the canteen. It is a global tourist Mecca. It has better demographics than Germany, Italy, or Spain.

But even the greatest nations must ultimately live within their means. Especially if they join a German currency union.

‘Every minute now counts in the effort to restore our country’s credibility’