Vulcan View: The latest EU developments 8 July – 12 July

Dissecting the results of the French election’s second round

Round two of the French elections on Sunday, 7 July saw France faced with potential political deadlock after no party secured an absolute majority. All three blocs fell short of the 289 seat threshold needed to control the 577-seat National Assembly.

Neither the major setback for Le Pen’s National Rally (RN), nor the left-wing coalition’s surprise didn’t prove President Macron´s intention right to create political stability by calling for a snap election. Without a single alliance having secured a working majority, it leads to further uncertainty about future French policymaking. As a result, France faces political and economic instability, characterised by political ungovernability and a hung parliament. Furthermore, the left-wing New Front National could exacerbate France’s already-large deficit.

Forming a new government will be a long and challanging process. President Macron might appoint a Prime Minister from the Socialist Party, such as Raphaël Glucksmann, but would need to integrate representatives from “Les Insoumis” and “Ensemble” (Macron’s party). This coalition-building process will lead to governance issues due to ideological differences. It is unlikely that the new government will use Article 49.3 to force legislative proposals, given their previous condemnation of this practice and the risk of censorship.

With the European Commission likely to place France under an Excessive Deficit Procedure (EDP) for exceeding the budget deficit limit of 3% of GDP, the fractious parliament makes it difficult to pass necessary budget cuts to comply with EU rules, further complicating the political and economic landscape.

Additionally, the implementation of the French Finance Law for 2024, expected in Autumn, faces challenges. The political outcome will play a crucial role in determining how the proposed measures are enacted. Political instability, could lead to delays and amendments and the practical aspects of implementing the law could face bureaucratic hurdles.

Despite all these, the CAC 40 index rose by 0.4%, and French shares and bond prices turned higher after initial falls.

It is important to note that a new dissolution of parliament and elections cannot be carried out within the year following a previous dissolution.

The results (as per Euronews)

• The New Popular Front (NFP) managed to secure 26.9% of the votes, taking 182 seats.
• The Macron Ensemble only received 22.3% of votes, giving them 168 seats.
• The National Rally (RN) and its allies secured 37.3% of votes, taking 143 seats.
• The Republicans won 45 seats, while other and regional parties won a total of 39 seats.

The National Rally amassed the most seats of any single party, with the party’s lead candidate Jordan Bardella denouncing its rivals political strategy to withdraw candidates from hundreds of races to avoid splitting their support. Although they have been set back, RN Leader Marine Le Pen remains optimistic about the future, stating “The tide is rising. It didn’t rise high enough his time, but it’s still rising. And as a result, our victory, in reality, is only delayed.”

The RN came short of expectations during the second round, it is crucial to note that it doubled its seats in parliament as compared to the last parliamentary elections in 2022, when it won 89 seats – which itself had already been a gain of 81 seats.

The New Popular Front coalition showcased a united front, preventing RN from winning a majority. Although, France has avoided a far-right government, the result has plunged the country into a politcal limbo, leaving parliament gridlocked.

What’s next

The election leaves parliament divided up into three big groups, the Left, Centrists, and the Far Right. Current Prime Minister Gabriel Attal (RE) has announced his resignation for today (Monday), but President Macron has asked him to remain “for the moment” in order to “ensure the stability of the country”, according to a statement from the Elysée Palace. The immediate objective is to reassure the financial markets and international partners.

It remains highly uncertain who the next Prime Minister will be, with the decision formally belonging to Emmanuel Macron. Political custom usually dictates that the had of government should be chosen from the strongest political force or coalition. There is currently no indication of Macron’s next move.

The New Popular Front have said that they immediately want to govern, with the Leader of the French Socialists arguing that the Prime Minister should come from the Alliance’s ranks. Among the shared policy objectives for the New Popular Front is to raise the minimum wage, increase wages for public sector workers, and impose a wealth tax. Leader, Jean-Luc Melenchon voiced his opinion stating, “The will of the people must be strictly respected… the president must invite the New Popular Front to govern”. 

What this means for the EU

Macron has been severely weakened in France, in turn this will have consequences for his position in Brussels. He has said France will continue to play a leading role in the bloc but the next French government doesn’t look as though it will be backing him. Whatever government emerges is unlikely to stay stable as there are many ideas the Left, Centrists, and Far-Right will never agree on.

 

The European Union’s Strategic Agenda: 2024-2029

Every five years, in the context of the European Parliament elections and before the appointment of the Commission, the European Council agrees on its political priorities and strategic orientations for the future. At its meeting in Brussels on 27 June 2024, the Council agreed on the strategic agenda for 2024-2029. It accounts for the global political landscape that is being reshaped by strategic competition, growing global instability, and attempts to undermine the rules-based international order. The current agenda aims to improve Europe’s sovereignty and equip it to deal with challenges such as Russia’s ongoing invasion of Ukraine, the fight against climate change, and mitigating the impact of the COVID-19 pandemic. The agenda is structured around three pillars: a “free and democratic”, “strong and secure”, and “prosperous and competitive” Europe.

A free and democratic Europe

Some of the EU’s primary strengths are values such as respect for human dignity, freedom, democracy, equality, the rule of law, and human rights, including the rights of persons belonging to minorities. To uphold these values within the EU and beyond, the strategic agenda recognises the need to promote the rule of law, democratic resilience and debate, and free speech. More specifically, it also aims to tackle foreign interference and destabilisation online, uphold the UN charter, and work towards a reformed and more inclusive multilateral system.

A strong and secure Europe

To assert its ambition and role as a strategic global player, the Council promises to continue to support Ukraine in its defence against Russia, build up the EU’s defence capacity with increased spending, and cooperate with transatlantic partners and NATO. It commits to continue the fight against organised crime, radicalisation, terrorism and violent extremism, and to strengthen its crisis prevention and response capacity for natural disasters and health emergencies. Finally, to manage the EU’s borders, it will introduce a merit-based EU enlargement process with incentives to run in parallel with necessary internal reforms, and a comprehensive approach to migration.

A prosperous and competitive Europe

The Council recognises that it must improve Europe’s economic security, to strengthen its long-term competitiveness and improve citizens’ economic and social well-being. To achieve this goal, it vows to deepen the single market and promote collective investment, to advance sustainable and resilient trade policies including secure strategic supply chains, and to foster innovation, education, and skills development. To tackle climate change and emerging technologies, it promises to prioritise the green and digital transitions by developing a genuine energy union and investing in digital technologies, supporting a resilient agricultural sector, and strengthening health cooperation at the European and international levels.

What does it mean for Europe?

The European Union aims to increase its global influence by supporting democratic values within and beyond its borders, enhancing its defence capabilities, and improving its economic security. In addition, by promoting the rule of law, the European Union seeks to achieve greater internal stability and unity. Finally, investments in the digital and green transitions will spur innovation and sustainable growth. This is the path the European Union intends to follow to ensure its long-term competitiveness. The Council agrees that all these measures will create the path for the EU to remain a strategic global power.

To achieve all these objectives, we can expect that the European Union will get increasingly involved in international affairs, especially in the areas of security and climate change. We should anticipate a significant increase in policy initiatives centred around innovation, economic integration, the environment, and defence. Finally, the European Union vows to implement new economic policies and concentrate on strategic investments to strengthen its economic resilience.

 

Ireland’s progress in the innovation sector

The European Innovation Scoreboard (EIS) is an annual comparative assessment of the research and innovation performance of each EU Member State, neighbouring European countries and selected third countries (global competitors). It assists stakeholders in determining where to focus their efforts in order to improve innovation performance while taking the country’s socioeconomic environment into account.

The European Union’s yearly innovation performance increased by 0.6% points between 2023 and 2024, similarly to between 2022 and 2023. The EIS measures innovation through assessing framework conditions, investments, innovation activities, and the impacts of innovation activities on employment, sales, exports, and environmental sustainability.

In terms of the European Innovation Scoreboard 2024, Ireland was deemed a ’Strong Innovator’ with performance at 113.2% of the EU average in 2024. There are eight Strong Innovators which means that their performance lies between 100% and 125% of the EU average in 2024. However, Ireland’s performance is above the average of the Strong Innovators, but its performance is increasing less than the EU.

In terms of dimension measurements, Ireland was one of the best performing Member States for ‘Employment Impacts’ which is based on two indicators—employment in knowledge-intensive industries and employment in innovative enterprises—and assesses the effect of innovation activities on employment. Furthermore, Ireland was the top-performing Member State for the ‘Sales Impacts’ dimension.
Three variables are included in the Sales Impacts dimension, which assesses the financial impact of innovation: exports of high-tech and medium-sized goods, exports of knowledge-intensive services, and sales that stem from innovative products.

Ireland’s strong increases since 2023 were innovative SMEs collaborating with others, employment in innovative enterprises, and innovation expenditures per person employed. Non-R&D innovation expenditures, SMEs introducing business process innovations, and enterprises providing ICT training were listed as Ireland’s strong decreases since 2023.

Overall, Ireland’s innovation performance was mostly consistent with only a few small fluctuations between 2017 and 2023. However, between 2023 and 2024, a positive trend developed which resulted in a 2.3 per cent improvement in comparison to 2017.

 

For more information, please contact the Vulcan team here.

 

 

Compliments of Vulcan Consulting – a member of the EACCNY.