Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another special episode of voter Nomics,
Speaker 2: the Bloomberg Podcast where politics and markets collide. I'm Stephanie Flanders,
Speaker 2: head of Economics and Government at Bloomberg, and this morning
Speaker 2: we have another historic election. A few days ago it
Speaker 2: was in the UK. This time it's in France and
Speaker 2: historic in a rather different way. We are in Paris
Speaker 2: the morning after French voters surprised the world by not
Speaker 2: granting Marine Le Penz Rassan party the largest number of
Speaker 2: seats in the French Parliament. Instead, her far right grouping
Speaker 2: came third, it looks like, and the new Popular Front
Speaker 2: on the left came first. So we have investors financial
Speaker 2: markets who were priced for a far right victory but
Speaker 2: probably a logjam in parliament. Instead we got a far
Speaker 2: left victory but probably a logjam in parliament. And so far,
Speaker 2: the way they've digested that result is to have the
Speaker 2: euro a bit weaker, but if anything, interestingly, a slight
Speaker 2: strengthening in French bonds relative to Germany. We'll see if
Speaker 2: that lasts as people start to realize quite how uncertain
Speaker 2: the future of the government is, and we're going to
Speaker 2: cut through that fog of uncertainty just a little bit
Speaker 2: over the next thirty forty minutes or so, here in
Speaker 2: the atrium of Bloomberg's Paris Bureau, with some very smart
Speaker 2: and distinguished guests from the Bloomberg Brains Trust. Starting on
Speaker 2: my far left, we have leonell Lon, known to many
Speaker 2: of you a Bloomberg opinion columnist writing about the future
Speaker 2: of money and the future of Europe, based here in Paris.
Speaker 2: And Eleonora Marvuedi, who is the economist for Bloomberg Economics,
Speaker 2: part of the economic research group that I run as
Speaker 2: part of the economics and government coverage at Bloomberg. She's
Speaker 2: also in Paris, and she's worked at pretty much all
Speaker 2: the big places OECD, Bank of England, I m F
Speaker 2: and World Bank, and joining them a very special guest
Speaker 2: who constitutes the brains Trust all when he's sitting by himself,
Speaker 2: Jean Clantrichet, obviously former European Central Bank President, Bank of
Speaker 2: France governor, long standing chair of the Group of Thirty,
Speaker 2: the Royal Institute in Brussels, and many other things.
Speaker 3: We have.
Speaker 2: A very kind audience here at what I was told
Speaker 2: was a slightly earlier hour for Parisian. So I thank
Speaker 2: you for coming in. In return, you get to ask
Speaker 2: some questions, I promise, but I must start with you.
Speaker 2: Jean Crotrichet, analyst, sent me their response to last night's
Speaker 2: results late last night with just a three word subject
Speaker 2: for the email. What a mess is that about? Right?
Speaker 2: Or should we be reassured and pleased by this outcome?
Speaker 4: I think it would have been a real mess. If
Speaker 4: the we have had an absolute majority, there would have
Speaker 4: been a total mess. If the new popular font would
Speaker 4: have had an absolute majority, it would also be really
Speaker 4: a mess. So we are in a situation where things
Speaker 4: are much better than the mess I was mentioning mess.
Speaker 4: I was mentioning that being said, of course, we have
Speaker 4: a Hong Parliament, which is a complex Hong parliament with
Speaker 4: a three third one third being clearly with a program
Speaker 4: which is very very aggressive, I would say, in some
Speaker 4: respect in terms of economic analysis, center in the second position,
Speaker 4: who we know him and we know what could be
Speaker 4: done by the Center, but he's not in the position
Speaker 4: of being the first parliamentary force. And then we have
Speaker 4: the number three, namely the extreme right. So that being said,
Speaker 4: if we were in another country, we would say, okay,
Speaker 4: let's compute. Where do we stand. Ah, we have an
Speaker 4: absolute majority center plus the Republica so I would say
Speaker 4: Republican Right and plus the Party Socialist. It's a governmental party,
Speaker 4: proved that he was able to govern France, and so
Speaker 4: of course, so why not having this kind of coalition.
Speaker 4: Of course, we are in France, we are not used
Speaker 4: to that. We are not in a position to demonstrate
Speaker 4: to our own people that it would be the right
Speaker 4: way to proceed. So we will see what happens. But
Speaker 4: it is obviously complex. Even if virtually I see this
Speaker 4: possible majority.
Speaker 2: You have all your years of experience, and then you
Speaker 2: also have your hope of what happens for France and
Speaker 2: for Europe over the next few years. As a result
Speaker 2: of this, what do you hope will happen in the
Speaker 2: next few and what do you expect to happen.
Speaker 4: As a citizen? I hope that after due meditation, discussion,
Speaker 4: assessment of the various possibilities, this idea that all taken
Speaker 4: into account, an alliance of political might that has the
Speaker 4: experience of government in France, namely the as I said,
Speaker 4: the Party Socialist, and maybe the gains. On the one hand,
Speaker 4: the republican republican right, as I said, and the Center
Speaker 4: could finally have the possibility of governing the country. It's
Speaker 4: very complex programs we are signed here and there, and
Speaker 4: I expect that it would be a long process. But
Speaker 4: in my opinion as a French citizen, it would certainly
Speaker 4: be something which would not be abnormal in comparison with
Speaker 4: all the other European democracies and would permit the country
Speaker 4: to be governed in a responsible fashion.
Speaker 2: You were saying to Francine, I think last week for
Speaker 2: Bloomberg that you didn't think the US was France was
Speaker 2: well suited to a technocratic government in the style of
Speaker 2: Monty government in all drug e governments in Italy. But
Speaker 2: that would seem to be at least one possibility coming out.
Speaker 4: Of this in politics you should never send ever, of course, nevertheless,
Speaker 4: it is not at all in the French condition. So
Speaker 4: I maintained what I told Francie. I think that it
Speaker 4: is not likely at all that we could have some
Speaker 4: kind of technocratic government in Italy. You not only had
Speaker 4: Monty and Dagie, you also had President of the Republics
Speaker 4: that we are coming from the Central Bank, and you
Speaker 4: had the succession of Prime Minister and then President of
Speaker 4: the Republic. I mean, it's it's a strong tradition in Italy,
Speaker 4: taking into account the complexity of the political life in Italy,
Speaker 4: taking also into account that there is a place in
Speaker 4: Roma where you have a very very strong techno structure,
Speaker 4: which is the Central Bank, and this is recognized by
Speaker 4: all political parties, by the people of Italy. So we
Speaker 4: are not in this position. The reason why I don't
Speaker 4: expect that we could have such but as I said,
Speaker 4: never said never, and.
Speaker 2: In your in your old jobs, you would have been
Speaker 2: particularly the ECP, you would be wondering about the fiscal
Speaker 2: financial implications of this uncertainty, and also what it tells
Speaker 2: us about the direction of French politics and what is
Speaker 2: going to be possible for President Macron or any future government.
Speaker 2: I mean, is the underlying message that this is a
Speaker 2: government that's going to borrow more and do less to
Speaker 2: get its public finances and control and less in the
Speaker 2: way of the business reforms that President Macron was supposed
Speaker 2: to be forging.
Speaker 4: First of all, I expect, of course that now that
Speaker 4: we know the result, the idea that we could embark
Speaker 4: on a program that would aggravate the situation in the
Speaker 4: fiscal side that would aggravate the situation in many respect
Speaker 4: as regards to the credit worthiness. If I may of
Speaker 4: the country would appear not being visible at all. So
Speaker 4: I expect a maturing process from now on that we
Speaker 4: know that we have the results the programs. And it
Speaker 4: was the case of the extreme right program, it's also
Speaker 4: the case of the extra of the left program, the
Speaker 4: new for popular we have their programs that are not feasible.
Speaker 4: Frankly speaking, and in my opinion, in my expert opinion,
Speaker 4: I'm speaking like an expert, not a French citizen. There
Speaker 4: I don't think at all that it would be in
Speaker 4: any respect reasonable to embark into new spendings. We have
Speaker 4: no room from a new that's my clear diagnosis. So
Speaker 4: I expect that being in a position of responsibility, we
Speaker 4: will see a dramatic realization by the which a political
Speaker 4: men and women in the question that it would be
Speaker 4: a catastrophe for the country to embark on additional massive spending.
Speaker 2: So that editation, which sounds like a warning.
Speaker 4: It's my expectations, it's my hope. Also it's a warning certainly,
Speaker 4: but the warning is there. I mean, you don't need
Speaker 4: any warning you have a situation that you have to
Speaker 4: be responsible in the situation.
Speaker 2: NL will this be taken as a warning, as an
Speaker 2: excuse or a pressure to mature, as Jean Proteiche is
Speaker 2: hoping advising.
Speaker 5: So I think what makes this a bit complicated is
Speaker 5: that even though some parties are saying that they won selection,
Speaker 5: I think it's pretty obvious that this was a vote
Speaker 5: against the penn a vote against certain scenarios, but it
Speaker 5: was not for anyone. Nobody has an absolute majority, so
Speaker 5: I think it's frankly exaggerated to imagine as you hear
Speaker 5: some on the far left immediately saying, this is a
Speaker 5: vote for our program. So I think programs are going
Speaker 5: to have to be fluid. I think there's no way
Speaker 5: of getting around it. I also think that my hope
Speaker 5: is that given the kind of extraordinary cynicism almost of
Speaker 5: the way so these coalitions were constructed, whether it is
Speaker 5: the far left, which was a real idea logical rainbow
Speaker 5: that was frankly almost untenable, and also in the center
Speaker 5: with this tactical voting in the middle, I am hopeful
Speaker 5: that there is going to have to be some reckoning
Speaker 5: on the program that comes out of a future coalition.
Speaker 5: There are the numbers for something approaching I don't want
Speaker 5: to jinx it. That's something like starmerism, where you have
Speaker 5: the Center plus the Greens and the Socialists. The numbers
Speaker 5: are there, even if the spirit may not be. So
Speaker 5: I think there is scope to imagine extremes being turned down.
Speaker 5: My concern is that the campaign itself was really not
Speaker 5: what I would consider to be a good campaign. It
Speaker 5: was full of I mean, even setting aside the whole
Speaker 5: fake news, there was fake history. There was lots of
Speaker 5: strange calls to you felt like you were voting for
Speaker 5: the nineteen thirty of the nineteen forties or nineteen eighties.
Speaker 5: There was a very little discussion about policy. So I
Speaker 5: think we may get into a situation where the reckoning
Speaker 5: of the parties and the elites comes a bit quicker
Speaker 5: than the reckoning for the voters. It could be quite unstable,
Speaker 5: and yes it may not last more than a year
Speaker 5: when it comes time to put a budget together. But
Speaker 5: right now I'm definitely more hopeful than I was a couple.
Speaker 3: Of days ago.
Speaker 2: Well, that's interesting about where we could be in a
Speaker 2: year's time, which I want to go to in a minute.
Speaker 2: But eleanor just to say that paint the scene for
Speaker 2: us a little bit about how much leeway there would be.
Speaker 2: I mean, Jean Claude is suggesting that the reality will
Speaker 2: become quite clear that they would be unable to implement
Speaker 2: certainly seriously expensive policies for the year. But what is
Speaker 2: the situation that France is in and how much room
Speaker 2: for maneuver is there.
Speaker 1: On that food Well, the situation is France's public finances
Speaker 1: are strained, that is, high, deficit is widen, interest payments
Speaker 1: are increasing. It's already considered to be under the excessive
Speaker 1: deficit procedure of the.
Speaker 2: EU, violating the borrowing rules of the European Union exactly.
Speaker 1: So deficit is lower than it's higher than three percent
Speaker 1: and debt is increasing. So the previous government or still
Speaker 1: current government this morning, has put together a very ambitious
Speaker 1: program to try to tackle these problems and decrease a
Speaker 1: deficit by twenty twenty seven and comply partially with their rules.
Speaker 1: This being highly questioned because it's very ambitious, but it
Speaker 1: was always the right direction. Now our viue is which
Speaker 1: whichever coalision or type of government comes in power, there
Speaker 1: is likely little effort to do any physical consolidation. So
Speaker 1: the best will stay at the current baseline, which already
Speaker 1: violates in the US. Now in the case of left
Speaker 1: centric government, likely the sent the left willing systems some
Speaker 1: fiscal spending, but it will have to be much more
Speaker 1: moderate than the full NFP program. So for example, what
Speaker 1: we estimate the NFP program could cost almost three percent
Speaker 1: of GDP annually, and that would be the freeze the
Speaker 1: deficits substantially by six bringing it to six point two
Speaker 1: percent by twenty twenty seven, far away from the roofs.
Speaker 1: So we if the spending is down to zero point
Speaker 1: five percent of GDP, still that will have keep the
Speaker 1: deficit wider than three percent and increase the debt to GDP.
Speaker 1: So overall, although there is a little room for any
Speaker 1: any fiscal spending, there is likely that there would be
Speaker 1: some to keep everybody having a codition.
Speaker 2: Bringing this grouping together and the kind of coalition building
Speaker 2: or the sort of alliance that was forged last week.
Speaker 2: Quite a few of mcfar's reforms were already put on hold,
Speaker 2: including the pension reform. I mean, if you are you're
Speaker 2: in the business community wondering about the underlying potential of France,
Speaker 2: and so it's not One of the most important things
Speaker 2: is sort of the long term, long term growth and
Speaker 2: what that enables. Should that be the concern that even
Speaker 2: with the maturing, even without expensive price tax, you won't
Speaker 2: get difficult reforms either.
Speaker 4: What I have to recognize is that during the seven
Speaker 4: years of Macro and successive governments, we had quite good
Speaker 4: policy as regards the micro economics. The I would say
Speaker 4: attractiveness of the country, the new investment and so forth.
Speaker 4: The diminishing of the unemployment has been quite spectacular. So
Speaker 4: this part of the policies were in my opinion, very
Speaker 4: much on the positive side. The problem was the I
Speaker 4: would say, public spendings. What you just said, the way
Speaker 4: we are not respecting the rules of Europe and also
Speaker 4: the companies and with other countries that we're behaving quite
Speaker 4: properly because they had a crisis after demand bother. So
Speaker 4: that makes a mixed picture. If I may, it would
Speaker 4: be in my opinion, extremely bad. Taking into account the
Speaker 4: starting point to have additional new spendings, you could imagine
Speaker 4: to have some kind of measures that we will not
Speaker 4: be new spendings, but we would give certain satisfaction to
Speaker 4: what I would say, qualify a Republican responsibility responsibilible left
Speaker 4: and you see what I mean there. So it seems
Speaker 4: to me that it's not totally impossible not to aggravate
Speaker 4: the situation, which would be in any case very very bad,
Speaker 4: because again, there is no home for maneuvering. And I
Speaker 4: expect that the realization that there is no room for
Speaker 4: maneuvering will progressively permit all the political parties leadership to
Speaker 4: understand that they have no room for manewary, whatever their affiliation,
Speaker 4: and including when they have signed a program on the
Speaker 4: left side which is obviously extraordinay ball and obviously extraordinary
Speaker 4: out of the situation taking into account again the starting point.
Speaker 2: Yes, So eleanor do you think in terms of just
Speaker 2: the cost of the micro slippage and the macro slippage.
Speaker 1: Well, I think that if we look at the program
Speaker 1: in the NFP, there is a lot of suggestion to
Speaker 1: increased spending on public services, to increase transfers, also reversed
Speaker 1: the pension reform and partially will be funded by increased axis.
Speaker 1: What we see is that, yeah, there will be some
Speaker 1: bushting and GDP in the short term because of increased
Speaker 1: pending there's no parts on investments that will have longer
Speaker 1: term impacts on the potential. Also, a reversal of the
Speaker 1: pension reform and increasing labor costs could also harm the
Speaker 1: labor supply. The other potsop is that they clearly stated
Speaker 1: they're not willing to comply with the austerity rules of
Speaker 1: the EU. So to what extent the whole NFB will
Speaker 1: stand behind this statement will determine how much they will
Speaker 1: moderate their policies.
Speaker 2: I mean, the worry would be that a majority of
Speaker 2: the French people have voted for radical, extreme solutions of
Speaker 2: one kind or another last night, and if we end
Speaker 2: up with a quote unquote reassuring combination, which is matured,
Speaker 2: which is realized, there's no room for maneuver on many
Speaker 2: of these things. The risk is that the French voters
Speaker 2: draw the conclusion that they have to vote even more
Speaker 2: emphatically for extreme because they've just ended up with the
Speaker 2: same thing they didn't the one thing they didn't want
Speaker 2: was a continuation of what they had. Would be the argument,
Speaker 2: I mean, Leonel, what are the risks of.
Speaker 5: That they're obviously present? That's true, I think though that
Speaker 5: I mean, it's interesting to me that certain figures are
Speaker 5: making it come back. Francois Land, who arguably pushed through
Speaker 5: some of the reforms that Macworn benefited from, has now
Speaker 5: made a kind of political comeback of sorts and is
Speaker 5: even speaking out against me in Oshal, telling him to
Speaker 5: keep quiet for for the sake of the left. Now,
Speaker 5: obviously the left has changed, and I don't think it
Speaker 5: would be the same kind of left if Hansoiland was
Speaker 5: to get a position of power. But I think the
Speaker 5: constraints that we're talking about are real, they will be felt.
Speaker 5: Maybe this this technocratic idea, even if a technocratic government
Speaker 5: is definitely not on the cards and not a normal
Speaker 5: French solution, it would be interesting to me if certain positions,
Speaker 5: if there was a desire to reach out and find
Speaker 5: certain a political figures, maybe former central bank governments I
Speaker 5: don't know present company accepted, but people who do have
Speaker 5: credibility in certain areas like the economy, to ease some
Speaker 5: of these tensions, because even beyond fiscal spending, there are
Speaker 5: deep seated problems in France productivity, innovation, demographics. I mean,
Speaker 5: these are these are real and if we have no
Speaker 5: ambition and it's just a government of convenience, that says
Speaker 5: let's cut here and spend a bit there, We're not
Speaker 5: going to solve it. So I hope again, my hope
Speaker 5: is that at some point the politics does have to
Speaker 5: take a bike a step back on some areage.
Speaker 2: I guess strong plot. We should just check it. You available, No,
Speaker 2: I noticed that you are almost exactly the same age
Speaker 2: as Joe Biden. For you, don't you think that there
Speaker 2: has to be some I mean, if you would say,
Speaker 2: and I think that Marie Napenn would say this, and
Speaker 2: indeed we should remember she got the same share of
Speaker 2: the vote as Kastama's Labor Party. People have voted for change,
Speaker 2: and if you're trying to respond to that and trying
Speaker 2: to prevent a move to the extremes, whether it's in
Speaker 2: a year or an extreme government within a year or
Speaker 2: within three years. Is the lesson of this that at
Speaker 2: some level there has to be a shift to the left.
Speaker 2: I mean, that's partly what leone saying. I mean, what
Speaker 2: would be a symbolic but significant move that could be
Speaker 2: made as that sort of olive branch to the voters
Speaker 2: who actually feel something has to change.
Speaker 4: The main problem is that, as we said, the country
Speaker 4: looks like being divided in three thirds, and two of
Speaker 4: the extreme thirds are totally at odds. So we are
Speaker 4: not in a situation where you can say the people
Speaker 4: wants changes and we will give them changes, because the
Speaker 4: changes in question are exactly at the opposite on major,
Speaker 4: major major points. So we are bound. And it's more
Speaker 4: one of the first time with the Fifth Republic to
Speaker 4: find out a way to get from that position. And
Speaker 4: my hope, as I said, is that if you take
Speaker 4: the Republican component of the Parliament, you have the theoretical
Speaker 4: possibility of having something which would be representative of the
Speaker 4: people because it represents something like a little bit more
Speaker 4: than the absolute majority when you add up to the
Speaker 4: Republicans on the one hand, and the Socialist Party is
Speaker 4: said to oversimplify on the other hand. So again everybody
Speaker 4: now has to reflect mature, as I said, make up
Speaker 4: his mind, not only of course, the leadership of the
Speaker 4: political parties, but the people of France. The people of France,
Speaker 4: they are not stupid. They prove that they were not stupid.
Speaker 4: They want to changes, but not to that extreme that
Speaker 4: they would have rocked totally the boat. So they might
Speaker 4: reflect themselves on what is happening and I also would
Speaker 4: bet on the common sense and the responsible I would say,
Speaker 4: attitude of our own Fero citizens.
Speaker 2: Leona, what do you think of the solution, particularly bringing
Speaker 2: with the Republicans who were not necessarily the great winners
Speaker 2: of last night's election. How do you think that people
Speaker 2: would respond to that?
Speaker 3: I think it's tough.
Speaker 5: I do wonder though, what if we had to find
Speaker 5: a lowest common denominator between all of these parties, what
Speaker 5: would it be? I mean, I think clearly taxation, right,
Speaker 5: taxes are going up, there's going to have to be
Speaker 5: some kind of concession right on on the wealth tax,
Speaker 5: on you know, some of the some of the tax
Speaker 5: proposals on on reforms. I just can't see the pension
Speaker 5: reform being rolled back. But already Gabriel Attal who's proven
Speaker 5: to be the comeback kid and the real political discovery
Speaker 5: of this, of this whole saga, because he has fecually
Speaker 5: broken with Maccorn, emancipating himself from Macorn to build this
Speaker 5: potentially this coalition. And he was the one apparently who
Speaker 5: said well let's let's suspend this welfare benefit reformers as
Speaker 5: a gest to the left. So there are gestures to
Speaker 5: make I think even even with with with le Penn
Speaker 5: there was it wasn't even extreme change, right. The whole
Speaker 5: bet was that there'd be some melonification, that she would
Speaker 5: be surrounded by experts and technocrats and it wouldn't be
Speaker 5: the extreme. Well, I think now we have to accept that.
Speaker 5: You know, there's a Maloney scenario on the right and
Speaker 5: there's a Starmer scenario on the left. And the real
Speaker 5: fight over the next few days is to see what
Speaker 5: what will it take, How how aggressively will sparks fly
Speaker 5: to carve off the Republican left from Minoshal. That's the
Speaker 5: that's the fight.
Speaker 2: Do you see individual figures coming out of this, whether
Speaker 2: it's Gabriel Lettel or Lusman. Do you identify future leaders
Speaker 2: of some kind of coalition in the current spectrum?
Speaker 4: You mean the new prime ministry.
Speaker 2: Well in terms of but also in terms of being
Speaker 2: a potential rallying point for some kind of I mean
Speaker 2: the discussion that the phrase was parliamentary arc but I
Speaker 2: mean not just for the bargaining now, but also as
Speaker 2: a potential candidate in four years time. I mean that's
Speaker 2: also something we're looking for.
Speaker 4: Are we not pronounced on the countdates? Three years time
Speaker 4: or two years and a half, would not embark on
Speaker 4: any kind of I would say speculation on the way
Speaker 4: it will proceed, but at a time after sufficient maturing
Speaker 4: and then the primary. The President of the Republic has
Speaker 4: a role to play because they will consult all political
Speaker 4: parties without exception, and it would also create the sentiment
Speaker 4: that things are more fluid than we might have thought.
Speaker 4: But all that being said, it seems to me that
Speaker 4: clearly there should be some kind of discussion for I
Speaker 4: would say, some kind of id majority or coalition that
Speaker 4: would last for a certain period of time between again
Speaker 4: what I call the Republican left, the Republican right, and
Speaker 4: the center, and you identify very clearly who would be
Speaker 4: the negotiating parties there. I agree that it's clear that
Speaker 4: a new program has to be set up. This new program,
Speaker 4: in my hope, would not comprehend any kind of net
Speaker 4: additional spending, because I share entirely of views that you
Speaker 4: expressed on the fact that there is no room for manualing,
Speaker 4: absolutely no room for manuring, not only in terms of
Speaker 4: I would say europe and European roles, but also no
Speaker 4: room for manuring in terms of preserving as much as
Speaker 4: possible the credit worthiness of the signature, and that is
Speaker 4: extremely important. That being said, of course, you have measures
Speaker 4: that can be taken without having a cost, and that
Speaker 4: might permit the I would say left on the one
Speaker 4: hand and the center right on the other hand, to
Speaker 4: be reasonably satisfied in the circumstances. So it is my hope,
Speaker 4: but it is also my expectations, because I don't see
Speaker 4: anything else to permit the country to proceed.
Speaker 2: That's a good spot to leave it for some questions
Speaker 2: from the audience or indeed any of the Bloomberg people here, Yes,
Speaker 2: in the back there.
Speaker 3: Hell, you mentioned a couple of times measures that now
Speaker 3: course that could please their left wing Republican parties. Could
Speaker 3: you name a couple of them that you may expect?
Speaker 4: No, No, I'm not rapping the new program. I'm sorry. Well,
Speaker 4: but my neighbors can do.
Speaker 2: That, eleanor can think of anything.
Speaker 1: It's a bit difficult to thing of them maybe not doing,
Speaker 1: for example, the unemployment reform, the unemployment benefits reform. It's
Speaker 1: in a way not adding benefits.
Speaker 2: What is it just those who does follow all of
Speaker 2: the reforms, which what would that be? What is that?
Speaker 1: So the current government has agreed to do any unemployment
Speaker 1: benefits reform that would start in July right now, and
Speaker 1: that will decrease the duration of the unemployment benefits and
Speaker 1: also tighten the rules for being eligible for unemployment benefits.
Speaker 1: And the estimate of the government was that these will
Speaker 1: add three point six billions of savings annually, So not
Speaker 1: doing that would keep the would have no impact because
Speaker 1: currently it's not accounted in our in the baseline, so
Speaker 1: the MF baseline or our baseline, but will keep the
Speaker 1: left happy.
Speaker 2: Jacqueline Simmons, he runs our European coverage.
Speaker 6: There have been steps forward with respect to incentivizing the
Speaker 6: finance and business community, which I think is reflected in
Speaker 6: this room today just in the way of you know
Speaker 6: again incentives and also centering Paris as a sort of
Speaker 6: financial hub post brexit. And I just wondered when any
Speaker 6: of you thought about what kind of paralyzing impact this
Speaker 6: might have, or last night's results might have on this community.
Speaker 1: Well, in my view, the first question is what will
Speaker 1: be the labor costs in the future, What will be
Speaker 1: the spending in terms of labor cost well, then going
Speaker 1: to increase or not if we embark into more left
Speaker 1: wing policies that's likely to happen. Also, what will happen
Speaker 1: with the labor force supply in general, what will happen
Speaker 1: with the rest of the reforms on the the incentivize
Speaker 1: people to get back into the into the workforce. But
Speaker 1: also there is a there is a question of how
Speaker 1: the markets will react to this uncertainty. And for example,
Speaker 1: with lingering potay of fiscal slippage and this political uncertainty,
Speaker 1: we expect that markets may spreads might stay wide as
Speaker 1: the current at the current levels for a bit longer
Speaker 1: until things settle down or in the case that there
Speaker 1: is any more likely to spend more left wing spending,
Speaker 1: then spreads even my White's further by for example fifty
Speaker 1: basis points compared to the current levels. That creates uncertainty
Speaker 1: and will make markets to look to be careful in
Speaker 1: the coming days in the weeks.
Speaker 2: Jactor, where do you think people who are moving to
Speaker 2: France who stayed here?
Speaker 4: I would say, first of all, let's take also into
Speaker 4: account the fact that the worst has been avoided in
Speaker 4: terms of frightening newcomers and or investors savers of France,
Speaker 4: Europe and the entire world. So that's something which we
Speaker 4: should not forget. Second, I would say that all will
Speaker 4: depend precisely on this maturing process. I was mentioning which
Speaker 4: is a multi party and I would say multi citizens
Speaker 4: naturing process. So we will see again. I am reasonably optimistic,
Speaker 4: as you could see. But of course, when you take
Speaker 4: a decision, you want to take your decision on the
Speaker 4: basis of facts, and we will see how things are
Speaker 4: moving from now on. Again, it seems to me that
Speaker 4: there is some kind of common sense solutions that would
Speaker 4: normally please all parties concerned and be the best for
Speaker 4: our fellow citizens. But because after all, a democracy must
Speaker 4: give the maximum amount of satisfaction to the fedow citizens.
Speaker 2: But it is.
Speaker 4: Absolutely clear that programs that are not visible in any
Speaker 4: case are doing a lot of harm to the Fedow citizen.
Speaker 4: I was myself experiencing that because when we had the
Speaker 4: crisis in Europe, have to say that those that have
Speaker 4: been spenders and spenders and spenders had to tell their
Speaker 4: fellow citizens we are very sorry, but now you have
Speaker 4: to tighten your belt your belts, and that is very
Speaker 4: very difficult, it is terrible. So again, being really reasonable
Speaker 4: is something which is very important for our fellow citizens.
Speaker 4: And they expect again that this very complex s meduling
Speaker 4: process we'll proceed from no One.
Speaker 5: Yeah, no, I guess it will obviously not come as
Speaker 5: easily to a left government than it did to mac
Speaker 5: Horn to do things like the Choose France summit, and
Speaker 5: even to talk about the Capital Markets Union. I think,
Speaker 5: you know, that does not seem to be part of
Speaker 5: the part of the current speech. If we think of
Speaker 5: the kind of extreme case, it's in the nineteen eighties
Speaker 5: when Mitihont came to power, there were nationalizations and its appropriations.
Speaker 5: Obviously we're not talking about that. And I guess we
Speaker 5: could also think, well where, you know, if it is
Speaker 5: just a question of changing city every few years, where
Speaker 5: do people go. I mean, this is a global phenomenon,
Speaker 5: a European phenomenon. It's interesting to me that in Italy
Speaker 5: you still have all of these tax breaks to attract
Speaker 5: foreign investors in hedge fund managers, even with a right
Speaker 5: wing populist coalition. So and also I think even the
Speaker 5: Left Bloc talked about being open to defense fiscal integration
Speaker 5: at the European level, but with defense as the hook.
Speaker 5: So there are some I think avenues to kind of
Speaker 5: incite investment, but I think it will obviously not be
Speaker 5: with the same supply side focus as McCaul has been
Speaker 5: so far.
Speaker 2: If you pull back the lens from a from a
Speaker 2: global investing standpoint, and indeed a geopolitical standpoint. No. Bloomberg
Speaker 2: Economics has done important research showing how Europe as a
Speaker 2: group has fallen behind the US and its economic potential
Speaker 2: over the last ten years as a twenty nearly twenty
Speaker 2: percent gap that's open up on course to be a
Speaker 2: forty percent gap in the future if there's no improvement
Speaker 2: in the underlying fundamentals, the kind of things that you
Speaker 2: would need to do to untap the kind of investment needed,
Speaker 2: because it seems it's investment that's the gap is capital
Speaker 2: markets union is potentially joint debt issuance to underpin investments
Speaker 2: in green technologies, all of these things that we talk about,
Speaker 2: the digitalization of the economy, encouraging more high tech successes.
Speaker 2: In confronting a US government which under whatever president, is
Speaker 2: going to be pushing money into industrial policy and forging
Speaker 2: a very different, perhaps more interventionist, more mercantilist economic policy.
Speaker 2: Before this election, we would have said that the big
Speaker 2: question mark around whether Europe could possibly do that is
Speaker 2: the Franco German weakness, is the weakness of that relationship,
Speaker 2: but also the fact of the two of the two
Speaker 2: leaders present, Macon and Olaf Schultz, both both being extremely weak.
Speaker 2: I mean that doesn't change, Jean Claud. I mean, if
Speaker 2: you are looking to Europe to have to actually step
Speaker 2: up and do things over the next few years in
Speaker 2: response to China and the US, that seems less likely,
Speaker 2: even less likely now than a week ago, or just
Speaker 2: as unlikely.
Speaker 4: It doesn't seem to be unlikely at all, to be Frank,
Speaker 4: because there is a recognition, there is a joint diagnosis
Speaker 4: on the fact that we cannot stay as we are
Speaker 4: with the US on the one hand and China on
Speaker 4: the other hand, on a number of very very important
Speaker 4: issues like high tech, like the platforms, the digital digitalization
Speaker 4: of our continent, and so forth and so forth. So
Speaker 4: I think that this is the underlying diagnosis which is present,
Speaker 4: which is recognized more or less by the various countries
Speaker 4: concern whether or not with this result of this election,
Speaker 4: the cooperation between Germany, France and all others will be
Speaker 4: oversimplified or over complicated. We will see you again I'm
Speaker 4: not necessarily pessimistic, but the fact is that it was
Speaker 4: not working very well. But we just addressed the question
Speaker 4: of eighty one and the program of eighty one. I
Speaker 4: only want to remind all of us when the Left
Speaker 4: came in power in eighty one, we had overall outstanding
Speaker 4: debt as a proportion of GDP of twenty percent of
Speaker 4: the GDP. We are at tw one hundred and eleven
Speaker 4: percent of GDP. We had a deficit of minus zero
Speaker 4: point one percent of the GDP. We had minus five
Speaker 4: point five or something. So we are in a very
Speaker 4: difficult different situation and we have to take account, of course,
Speaker 4: of that. It seems to be very important now on
Speaker 4: what you said on the US versus Europe. You are
Speaker 4: right in terms of absolute GDP and absolute GDP per capita.
Speaker 4: But part of the difference between the US and US
Speaker 4: is that the European, for their own I would say sake,
Speaker 4: prefer not to work too much. And this is true
Speaker 4: in all European countries. I was surprimed myself to read
Speaker 4: check with Germany, and in Germany you have a lot
Speaker 4: of part time jobs. That makes all taken into account,
Speaker 4: the number of our work quite miserable in comparison with
Speaker 4: the US and the same or less and certainly the
Speaker 4: same in the UK too. I mean, we we are
Speaker 4: living in a different universal disrespect and of course it
Speaker 4: makes an enormous difference. But when I look at the
Speaker 4: best countries in Europe and the productivity our works, the
Speaker 4: difference is not that big. And also we have to
Speaker 4: take into account, of course that a lot of European
Speaker 4: countries are catching up even on the best European not
Speaker 4: necessarily on the best European states, So all American states
Speaker 4: all taken into account. I think that we should not
Speaker 4: overdo the difference between the US and Europe, even if
Speaker 4: they are absolutely clear. I would say elements and sectors
Speaker 4: where we are absolutely miserable and we have to work
Speaker 4: on not being that miserable in the London all right.
Speaker 2: Well, a final question from Alan Katzachi.
Speaker 7: You mentioned Jeanie, You mentioned that lady, and I'd like
Speaker 7: to go back a little bit further. You also talked
Speaker 7: about how the president will have to meet with every
Speaker 7: single political party. There has to be a maturing process.
Speaker 7: Everything you say reminds me of what the French rejected,
Speaker 7: which was the Fourth Republic before Charles de gaup put
Speaker 7: in the Fifth Republic. You know, we had this constant
Speaker 7: negotiation with various parties in Parliament. It was an unstable situation.
Speaker 7: In what way is it the same now as it
Speaker 7: was pre nineteen fifty eight and in what ways is
Speaker 7: it different.
Speaker 4: First of all, the President of the Republic has powers
Speaker 4: that the President of the Fourth Republic had not, so
Speaker 4: that is very clear. In particular in appointing the Prime Minister,
Speaker 4: it's a decision of the President of the Republic himself
Speaker 4: according to the Constitution. We also have to recognize that
Speaker 4: the Fourth Republic didn't do such a bad job, all
Speaker 4: taken into account, of course, the main problem of the
Speaker 4: Fourth Republic it was in impossible for them to i
Speaker 4: would say, face up with the Algerian War, and the
Speaker 4: Fifth Republic came out of this absolutely capacity of the
Speaker 4: Fourth Republic to face up with that war. But all
Speaker 4: taken into account in the economic and functionial sphere, and
Speaker 4: even in the defense sphere, because the nuclear deterrent of
Speaker 4: France started under the Fourth Republic. So all taken in
Speaker 4: all the res taken into account, it was not that
Speaker 4: such a poor political system. So if we are we
Speaker 4: won't be closer to the Fourth Republic in my opinion,
Speaker 4: because of the institutions of the Fifth Republic, but we
Speaker 4: would be closer perhaps to other European As a matter
Speaker 4: of fact, there's not a single European country which had
Speaker 4: the equivalent of the Fifth Republic, and they all have
Speaker 4: those negotiations to have a coalition with various political sense
Speaker 4: stivities after the election, and we are more or less
Speaker 4: pushed in this direction, which again I would not consider absurd,
Speaker 4: and the reference to the Fourth Republic doesn't seem to
Speaker 4: be sufficient to say no, no, let's not do that.
Speaker 4: Comparison with the other countries in Europe is something which
Speaker 4: is quite an argument or embarking on such discussions.
Speaker 2: As you know, the way people see these things is
Speaker 2: two data points. Is a trend. We have a Keir
Speaker 2: Starmer labor government in the UK. We have the left
Speaker 2: out performing all expectation here in France. Is there a
Speaker 2: possibility that this is the beginning of the end for
Speaker 2: the rise of the populist right that we hear about
Speaker 2: or is it actually just been a dress rehearsal for
Speaker 2: next time when they'll manage it.
Speaker 4: I said never said never in politics, So no, I
Speaker 4: would say it is a clear sign that at a
Speaker 4: certain moment there is a popular reaction because clearly we
Speaker 4: are living in a democracy. The votes are secret, the
Speaker 4: bulletin are put in the envelope by each individual, each
Speaker 4: I would say, fellow citizens totally independently, and nobody knows
Speaker 4: and can know what he's doing. So it seems to
Speaker 4: me that the sign that has been given by the
Speaker 4: French people, the French citizenship, is very, very important. But
Speaker 4: I will not draw definitive conclusion on the fact that
Speaker 4: now there is aggressive with rowal of public take into
Speaker 4: account as that in the left constituency there are also
Speaker 4: populist elements in the left. They are also part of
Speaker 4: the political spectrum.
Speaker 5: You know, well, no, I don't Populism is not going
Speaker 5: to be defeated this this They are not part of
Speaker 5: the furniture.
Speaker 2: That's just a fact.
Speaker 5: The US, the UK, I mean, Trump may come back
Speaker 5: later this year, and in the UK Nigel Farage is
Speaker 5: even has an even bigger pulpit than ever. So I
Speaker 5: think we shouldn't get too attached to the idea that
Speaker 5: nothing should change or shouldn't change too much in purchasing power,
Speaker 5: inflation and immigration were the two top concerns for voters
Speaker 5: in this election. And if we don't even try and
Speaker 5: offer some kind of dream to people who have seen
Speaker 5: real wages squeezed, to feel their living standards of declined,
Speaker 5: and where the divide between rural and urban France is
Speaker 5: still as deep as ever, then we are going to
Speaker 5: get the pen again in a year.
Speaker 3: Or two years or three years.
Speaker 5: So let's let's let's not forget that.
Speaker 2: Okay, we have a message of I think we've cut
Speaker 2: through some some fog, we have some optimism, but also
Speaker 2: taking some important lessons from this from this result, and
Speaker 2: of course we've still got plenty of plenty to watch
Speaker 2: the next few weeks because we don't know what's going
Speaker 2: to happen. But thank you for all being here for
Speaker 2: our recording of voter Nomics from our Paris bureau, and
Speaker 2: thank you to our excellent guests Leonell Laurent, Eleonora mabro
Speaker 2: Edi and of course Jean Claude Triche. Subscribe to voter
Speaker 2: Nomics wherever you listen to podcasts, everyone in this room,
Speaker 2: I shall expect to do that, and if there was
Speaker 2: anything you didn't quite catch, you will also be able
Speaker 2: to hear it on the Voto Nomics podcast feed, but
Speaker 2: from Paris. Thank you very much.