Macron’s pension reform decision adds to terrible smell in Paris
It’s not just the mounds of garbage lining the streets of Paris that are starting to smell. Now there’s a stench of desperation from the Elysee Palace as Emmanuel Macron forces his pension reform bill through parliament without a vote — and just as the economy goes bad. It’s a hollow victory.
If Macron is resorting to executive fiat to enact a hike in the minimum retirement age to 64 from 62, it’s because his government repeatedly has failed to win backing from the public or enough votes from potential allies in parliament, where he lacks an absolute majority. It turns out that in a post-pandemic, post-Ukraine economy, even the logic of demographic decline — it’s estimated there will be only 1.2 French workers for every retiree by 2070 — isn’t enough to convince the French that their inter-generationally unfair pay-as-you-go system is running out of steam.
After what Le Monde compared to a “long episode of ‘House of Cards,’ ” the parliamentary arithmetic just looked too tight for an increasingly isolated Macron. Not only did natural allies on the centerright fail to back him, but Macron’s own centrist bloc cracked under the pressure of conflicting political sympathies and aspiring presidential contenders to replace Macron in 2027.
The unity of trade unions opposed to the reform meant there was little chance of dividing and ruling. And the absence of an anarchic Yellow Vest movement has kept public support for strikes high.
Macron’s high-stakes bet is that this reform is too crucial for France’s economic credibility to risk being shot down in parliament. That may be right, but it has the upshot of poor democratic optics and bad economic timing, coinciding with Christine Lagarde’s own fight for credibility in keeping a lid on runaway inflation as the European Central Bank jacks up interest rates.
That risks adding a credit crunch to a gridlocked economy, with unions calling for renewed strike action to keep the pressure on the government.
“The fallout from pension reform risks increasing social unrest at a time when the economy is slowing,” says Barclays economist Philippe Gudin. “If it persists, it will have an economic impact.” After barely growing in the fourth quarter, the French economy is set to contract 0.1% in the first quarter, according to a Bloomberg economist survey conducted March 3-9. French PMIS are only just in expansion territory, and bankruptcies are on the rise. Strikes are far from the only problem, but they won’t help.
So although this is technically a win for Macron, who wants to revive his yen for reform after a pandemic-era deficit splurge, it doesn’t feel much like one. His party troops are demoralized, his approval ratings are at a three-year low and his prime minister, Elisabeth Borne, now faces a no-confidence vote in parliament. Far-right leader Marine Le Pen is widely expected to benefit the most from the chaos, while farleft firebrand Jean-luc Melenchon stokes the fire of protests. The cliche of a stubborn and un-reformable Gaul is back.
There are some optimistic signs on the horizon, to be sure. Macron’s bid to prod the European Union into a more independent, integrated direction — despite mounting policy disagreements between Paris and Berlin — might be yielding results. The EU this week unveiled a draft of new measures aimed at nurturing green tech and securing raw materials to keep up with the U.S. and China’s increasingly protectionist growth race. The euro area needs investment, and more integration will help.
Yet European ambitions may serve only to highlight the domestic quagmire of Europe’s No. 2 economy. Even as Macron gave diplomats a boost with more funding this week, the dirty business of Parisian garbage remains unsolved. With some 9,000 tons of waste yet to be collected, the police are set to requisition striking collectors in the name of public health.
Working longer and retiring later has a price; so far it’s Macron who’s paying it.