French Candidates’ Economic Programs Hold Key to the Election

https://www.nytimes.com/2022/04/18/world/europe/france-election-economy.html

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PARIS — As President Emmanuel Macron wove through crowds during a campaign stop in northern France last week, an elderly voter got in his face to protest one of his most unpopular economic proposals: raising the retirement age to 65 from 62 to fund France’s national pension system.

“Retirement at 65, no, no!” the woman shouted, jabbing a finger at Mr. Macron’s chest as he tried to assuage her. The boisterous exchange was caught on camera. Two hours later, he retreated, saying he would consider tweaking the age to 64. “I don’t want to divide the country,” he said on French television.

Mr. Macron’s reversal on a key element of his economic platform, in an industrial region backing the far-right firebrand Marine Le Pen ahead of France’s presidential election next Sunday, was a reminder of the social distress dominating the minds of voters. He and Ms. Le Pen have starkly divergent visions of how to address these concerns.

As they cross the country in a whirlwind of last-minute campaigning, their runoff will hinge to a large extent on perceptions of the economy. Worries about widening economic insecurity, and the surging cost of living amid the fallout from Russia’s war on Ukraine, have become top issues in the race, ahead of security and immigration.

Ms. Le Pen won by a comfortable margin in the first round of voting last Sunday in places that have lost jobs to deindustrialization, where she has found a ready audience for her pledges to bolster purchasing power, create employment through “intelligent” protectionism and shield France from European policies that expanded globalization.

While Mr. Macron is still expected to win in a tight race, workers in restless blue-collar bastions may yet prove a liability. Despite a robust recovery in France from Covid lockdowns — the economy is now growing at around 7 percent, and unemployment has fallen to a 10-year low of 7.4 percent — many feel inequality has widened, rather than narrowed, as he pledged, in the five years since Mr. Macron took office.

After France’s traditional left-wing and right-wing parties collapsed in the first round of voting, both candidates are scrambling to lure the undecided and voters who gravitated to their opponents — especially the far-left firebrand Jean-Luc Mélenchon — in large part by recasting major planks of their economic programs to appeal to those struggling to get by.

Pensions is a case in point. Mr. Macron has worked to recalibrate his image as a president who favors France’s wealthy classes, the business establishment and white-collar voters as he set about overhauling the economy to bolster competitiveness.

In 2019 he was forced to set aside plans to raise the retirement age to 65 after raucous nationwide strikes shut down much of France. He had sought to streamline France’s complex system of public and private pension schemes into one state-managed plan to close a shortfall of 18 billion euros, or about $19 billion.

Following his confrontation in northern France last week, Mr. Macron insisted that he would continue to push back the retirement age incrementally — by four months per year starting next year — but that he was open to discussing an easing of the plan in its later stages.

“It’s not dogma,” he said of the policy. “I have to listen to what people are saying to me.”

Ms. Le Pen accused Mr. Macron of engaging in a policy of “social wreckage” and of blowing with the wind to capture votes, although she has also shifted gears after the protectionist economic platform she advanced five years ago spooked businesses. She dropped plans to withdraw from the European Union and the eurozone.

Today, Ms. Le Pen favors maintaining the current retirement age of 62, abandoning a previous push to reduce it to 60 — although certain workers engaged in intensive manual labor like construction could retire at the lower age.

As Ms. Le Pen seeks to rebrand her far-right National Rally party as a kinder, gentler party than the one she steered in 2017, albeit with a clear anti-immigrant message, she has focused on economic issues close to blue-collar voters’ hearts.

She got out front on one of the biggest issues of the campaign: a surge in the cost of living.

While Mr. Macron was trying to broker a cease-fire in Ukraine, Ms. Le Pen was visiting towns and rural areas across France, promising increased subsidies for vulnerable households.

She pledged tax cuts for companies that raise salaries by 10 percent for employees who earn up to three times France’s minimum wage. She is also vowing to slash sales taxes to 5.5 percent from 20 percent on fuel, oil, gas and electricity, and to cut them altogether on 100 “essential” goods. Workers under 30 would be exempt from income tax, and young couples would get interest-free housing loans.

Her France-first policy extends even further: To make up for increased spending on social programs, she has said she would slash billions in social spending on “foreigners.”

She has also vowed to create jobs and re-industrialize the country by prioritizing French companies for government contracts over foreign investors and dangling a host of expensive tax incentives to encourage French companies that have branched out overseas to return to France.

While she has abandoned talk of a so-called Frexit — a French exit from the European Union — some of her proposals to protect the economy would amount to essentially that, including a pledge to ignore some European Union laws, including on internal free trade. She has said she would withhold some French payments to the bloc.

Mr. Macron has branded such promises “pure fantasy” and is proposing to retain many of his pro-business policies, with modifications.

Having vowed to lure jobs and investment, under his watch foreign companies have poured billions of euros into industrial projects and research and development, creating hundreds of thousands of new jobs, many in tech start-ups, in a country that has not easily embraced change.

At the same time, he has faced a challenge in discarding the image of an aloof president whose policies tended to benefit the most affluent. His abolition of a wealth tax and the introduction of a 30 percent flat tax on capital gains has mainly lifted incomes for the richest 0.1 percent and increased the distribution of dividends, according to the government’s own analysis.

After a growing wealth divide helped set off the Yellow Vest movement in 2019, bringing struggling working-class people into the streets, Mr. Macron increased the minimum wage and made it easier for companies to give workers “purchasing power bonuses” of up to 3,000 euros annually without being taxed, a policy he has pledged to beef up.

As inflation has surged recently, Mr. Macron has also authorized billions of euros in subsidies for energy bills and at the gas pump and has promised to peg pension payments to inflation starting this summer. He has vowed new tax cuts for both households and businesses.

His economic platform also aims for “full employment,” in part by pressing ahead with a series of pro-business reforms that has continued to lure the support of France’s biggest employers’ organization, Medef.

“Emmanuel Macron’s program is the most favorable to ensure the growth of the economy and employment,” the group said last week, adding that Ms. Le Pen’s platform “would lead the country to stall compared to its neighbors and to put it on the sidelines of the European Union.”

For all the differences, the pledges by Mr. Macron and Ms. Le Pen have one thing in common: more public spending, and less savings. According to estimates by the Institut Montaigne, a French economic think tank, Mr. Macron’s economic plan would worsen the public deficit by 44 billion euros, while Ms. Le Pen’s would widen it by 102 billion euros.

“These shifts are significant enough to think that some of their proposals cannot actually be applied — except if they put in place budget austerity measures that they are not talking about,” Victor Poirier, director of publications at the Institut Montaigne, said.