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France Under Macron: What Does It Mean And What To Expect

France has just been through a major election period occurring every five years, which also marks a profound reshaping of its political landscape. The memo below outlines the main takeaways of these past few months and what it means for France as well as for the EU.

Executive Summary

• The election of President Macron marks a new stage in the reshaping of the French political framework, with the victory of an independent candidate transcending the classic Left/Right divide.

• The Government appointed by Mr. Macron, led by Prime Minister Edouard Philippe, further blurs the lines by including members from various political parties and currents.

• Emmanuel Macron also managed to obtain a solid majority in the Parliament for his newly created party, La République En Marche (LREM), further strengthened by the centrist party MoDem but also by dissident MPs from other parties, in particular the center-right Les Republicains (LR).

• With this broad support in Parliament and an opposition largely weakened, President Macron is in position to move forward with his program of reforms, involving both a boost of French competitiveness through pro-business measures and an ambitious French stance at EU level.

• In the short term, the Government will kick-start its mandate by initiatives in the field of labor law, the organization of political life and security.

• A number of reforms aimed at improving the environment for doing business in France are also considered by the new executive power, involving structural reforms of the French “social model”, tax and social contributions, professional training etc. A bill strengthening authorities’ role as counsellors and condoning tax payers’ right to error, is also foreseen for end-2017.

• A Government as a platform strategy should bring about new methods to accelerate the digital transformation of the State and public services, to be implemented by a Deputy Minister with extensive powers in the field, directly reporting to the Prime Minister.

• President Macron has put a specific emphasis in tech and innovation, with new public support and funding in that sector, in parallel to defending new regulations at EU level, especially for online platforms.

• Data protection and privacy, while not key priorities, could see a few regulatory adjustments, particularly in relation to the general personal data protection regime.

• A set of cybersecurity measures should be included in the forthcoming security bill, but other provisions are expected after the release of a new cyber defense strategy end-2017.

• Emmanuel Macron, though a pro-trade advocate, advocates for the EU to strengthen its negotiation and trade defense powers. He will likely promote and support a better reciprocity in foreign trade and public procurement at EU level.

I. A Profoundly Reshaped Political Landscape

• Freshly elected President Emmanuel Macron won his bet not only to won the most important French election as an independent candidate with no previous political mandate, but also to obtain an absolute majority in the French parliament’s main chamber.

• A President Transcending The Classic Left/Right Divide, Emmanuel Macron, President of the French Republic,
39-years old political novice, has never been elected before and does not have the same background as the traditional French politicians.

• Pro-Europe, social-liberal economic line with moderate pro-business reforms agenda

• The former Minister of Economy of Socialist President Hollande, he founded
in his own movement ‘En Marche’ in April 2016.

• He decided to run for the presidential election as an independent candidate, i.e. not supported by the traditional parties, positioning himself as outside of the classic Left/Right political divide in France

• He was elected as President of the French Republic in May 2017 against the Marine Le Pen, leader of the extreme-right Front National.

Key Takeaways

• The election of President Macron marks a new stage in the reshaping of the French political framework, with the victory of an independent candidate transcending the classic spectrum.

• A historic elimination, in the first round, of the main traditional political parties in France (Left-wing Socialist Party and center-right Les Republicains).

• Like in other EU countries, the French populist Right is gaining traction but hit a glass ceiling with a strong mobilization against Ms. Le Pen in the second round of the election.

A Strong Executive Power Supported By A Solid Majority In Parliament

The French institutions classically rely on an executive branch, formed by the Government and the administration, led by the Prime Minister (under the general oversight of the President), and on a legislative branch, formed by the Parliament composed of two chambers, as well as on the judicial power.
Executive Branch

• Edouard Philippe, Prime Minister, 46-year-old with a classic high-civil servant training (ENA), former MP, he is a politician from the Center-Right Party Les Republicains (LR).

• Belonging to the moderate branch of the LR party, he is a close ally of Alain Juppé, former center-right Prime Minister. With pro-business and pro-Europe views, he is considered as “compatible” with Macron’s program for his Presidential mandate.

• His extensive field experience in local government and the political world as well as his moderate positions are considered as assets to win over the support of a group of MPs from his party, Les Republicains.

• The Government led by Edouard Philippe is made of 30 members, including 16 Ministers. Gender equality is fully respected and many members come from the civil society. It has a rather unique composition in French modern history as it mixes various political parties and currents (Socialist Party, Les Républicains, MoDem…), further blurring the lines of the French political spectrum.

Key Members of the French Government

Home Affairs: Gérard Collomb
Ecology: Nicolas Hulot
Europe And Foreign Affairs: Jean-Yves Le Drian
Justice: Nicole Belloubet
Defense: Florence Parly
Economy And Finance: Bruno Le Maire

Legislative Power: A Solid Majority In Support To The President

• The National Assembly is one of the two houses, with the Senate, forming the French Parliament. It is composed of 577 members elected for a 5-year mandate through a direct suffrage system.

• Both houses discuss and adopt the laws, but the National Assembly has the most significant role and powers, notably as it can have the final say against the Senate during the law-making process. The French institutional tradition is that the party that has obtained the majority of seats in the National Assembly forms the Government.

• Having first founded a “movement”, President Macron created his official party, La Republique En Marche (LREM) in the perspective of the June 2017 Parliament elections. Here again, he positioned his party as “cross-spectrum”, managing to rally both members from the Socialist Party and from the Right- wing.

Major Election Takeaways

• Despite a low turnout (43.4%), A solid victory for President Macron, with 308 seats obtained by the candidates of La République En Marche (LREM), corresponding to an absolute majority. The centrist party MoDem, allied to President Macron, has gained another 42 seats, strengthening the President’s support in the Assembly.

• A scattered opposition: Center-right party Les Republicains (LR) comes second, with 137 seats, while the Left is severely weakened with 46 seats only for the Socialist Party (PS) and 27 for the extreme-left party France Insoumise (FI). Marine Le Pen’s Front National (FN) obtains 8 seats.

• This absolute majority should allow the new President to adopt his forthcoming reforms without having to compromise too much (see below). In addition, Emmanuel Macron has managed to gain the support from dissident groups among the main parties, notably LR, and should therefore be able to rely on a broad margin of maneuver.

• A very “novice” National Assembly (75% of the elected MPs are new in the job), with more diversity (a record of 38% of women against 25% in the last mandate) and more representatives of civil society.

II. Emmanuel Macron’s Main Projects And Positions

• President Macron has outlined a number of short-term priorities for his mandate, as well as a path forward for further reforms, a number of which involve an ambitious French stance at the EU level.

Short Term Priorities

• Introducing more flexibility in labor law rules, notably in the negotiation of working hours and salary agreements within companies, capping compensations for irregular firings in labor court procedures…, through a fast-track process, as of summer 2017;

• Presenting a bill on restoring the integrity of political life, to tackle conflicts of interest, the remuneration of elected officials etc., an electoral promise that stemmed out in response to the scandals that marked the campaign;

• Swiftly adopting a security and anti-terrorism bill, including the granting of new powers to authorities to access, intercept and exploit electronic data.

Improving Business Environment

• Structural reforms of the French “social model” are expected throughout his mandate, starting with the loosening of Labor rules and continuing with reforms of professional training and apprenticeship, unemployment benefits and pensions.

• Macron also seeks to induce a paradigm shift in the relationship between the Administration and the tax payer. By end-2017, the Minister for Public Action and Public Accounts, Mr. Gerald Darmanin, should present a bill seeking to condone tax declarations errors made in good faith and to strengthen their right of rectification during tax audits.

• Further initiatives to improve the business environment in France and attract foreign companies (notably in the framework of Brexit) should be proposed, including with regards to tax and social contributions. Macron is also looking to position Paris as an alternative financial center able to compete with London.

Digital Sector

• Accelerating the digital transformation of Administration and public services. A Deputy Minister for Digital Affairs, Mr. Mounir Mahjoubi, has been attributed extensive powers in that regard.

• Deploying a “Government as a platform” strategy with the objective of digitizing all administrative procedures by 2022. Several issues should be tackled, namely the pooling of shared resources between Ministries’ services and the modernization of the interface between the State and citizens.

• Accompanying the digital transformation of the industry and further support the development of the French tech sector notably through an announced €10bn funds for innovation.

• Strengthening the regulation of online platforms at EU level, notably by supporting the creation of a European public agency for the “digital trust”, responsible for supervising them. It is expected that France continues to actively push for new obligations for online platforms at EU level, to tackle issues such as the spread of online illicit content, perceived unfair competition matters etc.

• Macron has also sent signals towards multinationals online platforms that he would push for a strengthening, at EU level, of the fight against tax optimization practices.

• Maintaining at EU level the typical, moderate French authorities’ discourse on data protection and privacy. Macron’s program includes the renegotiation of the Privacy Shield by 2018, which must go through a joint EU-US annual review and must be adjusted to the EU General Data Protection Regulation (GDPR) by 2018. The renegotiation positions he would support is however not specified.

• Supporting a possible initiative to guarantee the free flow of data in the EU, dreaded by the former French government, provided that it includes exceptions notably for national security and for the protection of personal data purposes. This position is close to the existing EU legislative framework, which allows Member States to adopt restrictions for certain data transfers across borders.

• Presenting a legislative initiative to implement the General Data Protection Regulation (GDPR). The Ministry of Justice seems to share the view of the President of the French Data Protection Authority (CNIL), Mrs. Isabelle Falque-Pierrotin, that the implementation in France should pursue the objective of the harmonization of data protection rules at EU level as a priority.

• Improve cooperation between “large Internet groups” and public authorities in investigations involving encrypted data. A series of talks held with UK Prime Minister Theresa May in June resulted in common declarations for an improved access of authorities to encrypted data and a stronger cooperation, bilaterally and multilaterally, on the cross-border access to digital evidences.

• Adopting a bill on security and anti-terrorism in July, which includes proposals to provide new powers to administrative authorities to access, intercept and/or exploit data for security purposes.

• In terms of cyber defense strategy, reaching 6.000 staffers trained in cyber defense operations by 2022 (a measure which started being implemented by the former Government in December 2016) and increasing the budget for cyber defense tools. The cyber defense doctrine should be better defined in a White Paper on Defense and National Security for the 2019-2025 period, expected at the end of 2017.

• The government also has the possibility to review the French legal framework for operators of critical infrastructures, as it must transpose several provisions of the 2016 Network and Information Systems Directive into French law.

Trade And Investment

• Overall, Emmanuel Macron is a free-trade advocate with a view that the EU should strengthen its negotiation and trade defense powers, in line with the thinking of a part of the EU Member States such as Germany, and with the European Commission.

• The French government’s priorities at EU level therefore include proposal to raise the debate, at the EU Council, on the principle of reciprocity in public procurement and on limiting foreign investments in strategic sectors to preserve European interests. Macron has notably evoked the possibility to introduce a “Buy European Act” that would favor access to public procurement deals for firms that localize at least half of their production inside Europe and a screening of foreign investments in strategic sectors.

• France is also likely to support the current EU legislative initiative to strengthen the EU trade defense mechanisms (e.g. anti-dumping and anti-subsidy investigations and remedy).