France – Next out the EU Door?

With the next presidential election now less than a year away, the country remains under a state of emergency, a legacy of the deadly terrorist attacks in Paris late last year, and a renewed bout of union militancy underscores the degree to which President François Hollande’s Socialist government has alienated a key section of its traditional base of support. The incumbent’s woes suggest that the presidential contest will be decided in a run-off contest pitting Marine Le Pen, the leader of the far-right FN, against whichever of the three main contenders vying for the nomination of the center-right LR gets the nod.
Former Prime Minister Alain Juppé appears to be the favored choice of the LR’s base, but any of the prospective center-right candidates (the others being former President Nicolas Sarkozy and former Prime Minister François Fillon) would be expected to defeat Le Pen in a run-off contest with the backing of PS supporters. That said, continuing economic troubles and a refugee crisis have enhanced the resonance of xenophobic and euroskeptic political arguments among voters across Europe. As was made clear by the shocking victory of the Leave camp in the recent referendum on the UK’s membership in the EU, political agendas once dismissed as extreme are pushing their way into the mainstream, and, to the extent that the same is true of candidates, the possibility that Le Pen might win the presidential election is becoming less of a long shot.
Le Pen has already promised that she will give French voters a similar opportunity to decide France’s future in the EU. Of course, the appeal of such a pledge will be influenced significantly by the manner in which the Brexit scenario unfolds, and the market volatility and political uncertainty that have characterized the immediate aftermath of the in-or-out vote in the UK suggest that the possibility of Frexit might seem very unattractive to French voters 10 months from now. Both Sarkozy and Emmanuel Macron, the current minister of economy and a dark-horse contender for the presidential nomination of the PS, have spoken of the need for fundamental reform of the EU, a less extreme proposal that, if fleshed out in the coming months, could take some of the wind out of Le Pen’s populist sails.
In the meantime, the PS government is gamely attempting to secure passage of reforms aimed at reducing labor-market rigidities that are recognized as a significant impediment to generating the productivity and competitiveness gains that are essential to moving the economy off a slow-growth track. Proposals to liberalize rule on hiring and firing, relax enforcement of the 35-hour work week, and bring greater flexibility to the collective-bargaining process have met resistance from the trade unions and the government was forced to use a procedural maneuver to ensure that the bill was not blocked by leftist elements in the lower house of Parliament. Unfortunately, the room for compromise has been all but eliminated after the opposition majority in the Senate altered the text of the bill to make it more business-friendly.
For his part, Juppé has indicated that, if elected, he will administer a dose of UK-style “shock therapy,” entailing a mix of spending and tax cuts designed to spur growth, and, most likely, the presentation of a more muscular labor reform as part of a policy mix aimed at moving toward full employment. Implementing such an agenda will be a challenge in any case, and may be impossible if the LR fails to win a comfortable majority of parliamentary seats at elections that will be held next June. The emergence of the FN as a challenger for power means that the LR’s hopes of winning a majority may depend on getting a boost from strategic second-round voting by PS supporters, who may instead decide that they are comfortable with a larger parliamentary presence for the FN as a check on an LR president’s exercise of power.