France Unlikely to Overhaul Economy Before Next Election

France’s ruling Socialist Party is unlikely to try more economic reform before the next presidential election.

Prime Minister Manuel Valls and President François Hollande of France walk in the Elysée Place in Paris, October 22, 2014
Prime Minister Manuel Valls and President François Hollande of France walk in the Elysée Place in Paris, October 22, 2014 (Elysée)

Despite the liberal instincts of some of its leaders and hopeful signs of an economic recovery, France is unlikely to enact more than piecemeal reforms between now and the next presidential election, due in April 2017.

Politico reports that the ruling Socialist Party’s rhetoric on economic reform is mostly out of tune with what is happening.

President François Hollande’s attention has shifted away from an economic overhaul to more immediate concerns such as trying to improve his low approval scores, courting young voters and unifying a fractious, rebellious left-wing parliamentary majority.

Hollande is using the breathing space of .6 percent growth in the first quarter of this year to champion social reforms that should rally his leftist base.

Unemployment remains high at 10.6 percent — virtually unchanged from when Hollande took office three years ago.

The Socialist Party leader’s approval rating remains low at 27 percent. His opponent in the 2012 election, former president Nicolas Sarkozy, is making a comeback and could push Hollande out of the presidential runoff in 2017 to face the Front national‘s Marine Le Pen instead.

Le Pen, who has taken roughly a quarter of the votes in recent European Parliament and local elections, is one of the reasons why the rest of Europe isn’t calling too much attention to the fact that France has consistently underdelivered, according to Politico. Putting more pressure on the country could fuel support for a nationalist party that advocates a French withdrawal from the euro.

The reforms that were enacted have divided Hollande’s party.

The president who was elected on promises to soak the rich recognized last year that simply raising taxes wasn’t going to lift Europe’s second largest economy out of malaise nor shrink a budget deficit that has been above the European Union’s treaty limit of 3 percent since 2009. He appointed the reformists Manuel Valls and Emmanuel Macron as prime minister and economy minister, respectively, and let them push reforms through parliament that allow businesses to operate on more Sundays, shortened labor arbitration procedures and opened up protected professions such as pharmacists and notaries.

Hollande also unveiled tax cuts worth €40 billion by 2017 that should help companies reduce labor costs.

Although polls showed a majority of the French supported the measures, dozens of Socialist Party lawmakers threatened to vote them down, forcing Valls and Macron to bypass parliament altogether. The Greens quit Hollande’s coalition in protest. Other far-left parties refused to back the ruling party in the most recent local elections, allowing the conservatives to take over control of 28 départements.

More reforms, especially in the labor market which is Western Europe’s most rigid, are now unlikely.

The reason is that despite his prime minister’s tough talk, Hollande is wary of any reform that could embolden the rebel faction ahead of a Socialist congress on June 7. The government needs as much support as it can get from the party faithful for its policy line which has to be voted upon against competing “motions” — or policy proposals.

Even after the party congress, politics are likely to get in the way. There are more local elections in December and after that, “attention will turn firmly to the presidential race, leaving few windows for reform.”

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