Speaker 1: Brought to you by Bank of America. Merrill Lynch. Seeing
Speaker 1: what others have seen, but uncovering what others may not.
Speaker 1: Global Research that helps you Harness disruption voted top global
Speaker 1: research from five years running Meryll Lynch, Pierce, Fenner, and
Speaker 1: Smith Incorporated. One of the highlights of this week for
Speaker 1: me was going with my family to eat at La
Speaker 1: Madalen for dinner, which is a chain of French restaurants
Speaker 1: in the United States. It's almost They had a chicken
Speaker 1: creep that sounds lovely, and one of my daughters had
Speaker 1: a grilled cheese sand which they really don't vary the
Speaker 1: children's menu restaurants. Hello, and welcome back to Bloomberg Benchmark
Speaker 1: show about the Global Economy. I'm Scott landman and economics
Speaker 1: editor with Bloomberg News in Washington, and I'm Kate Smith,
Speaker 1: an editor with Bloomberg in New York. So, Kate, are
Speaker 1: are you much of a Franco file? Um? You know,
Speaker 1: I've never really been to France, which is a little embarrassing,
Speaker 1: I know, right, But I think everything I've heard about
Speaker 1: French culture, I don't see why I wouldn't like it,
Speaker 1: you know, like the that gets the coffees, the striped shirts,
Speaker 1: the berets. There's a lot to like there, there's a
Speaker 1: lot to like. I've been I've been to France once,
Speaker 1: just for a couple of days, but I don't speak French.
Speaker 1: And you know, one of the highlights of this week
Speaker 1: for me was going with my family to eat at
Speaker 1: La Madalene for dinner, which is a chain of French
Speaker 1: restaurants in the United States. It's almost had a chicken
Speaker 1: creep that sounds lovely, and one of my daughters had
Speaker 1: a grilled cheese sandwich. They really don't vary the children's
Speaker 1: menu in restaurants. That sounds a lot better than the
Speaker 1: sad desk salad that's awaiting me in a few minutes
Speaker 1: after Well. Anyway, that kind of leads into our topic
Speaker 1: for today. You know, you go back to June this year,
Speaker 1: the voters of the United Kingdom gave us Brexit. Then
Speaker 1: Americans decided to elect Donald Trump as president. Now, over
Speaker 1: the next few months, the world is going to turn
Speaker 1: its eyes to France, and they already are in some ways.
Speaker 1: It's it's the sixth biggest economy in the world and
Speaker 1: the third largest in Europe, and it's where a rising
Speaker 1: anti establishment, anti immigrant movement is threatening to deliver another
Speaker 1: blow to those smug global elites who think they know
Speaker 1: it all. Oh man, that the smug global elites, right, Scott,
Speaker 1: they got it coming again. I know, I know, it's
Speaker 1: not just the coastal elites this times, the global elites.
Speaker 1: All right. Well, it's true though, populist anti immigrant movements
Speaker 1: are really they're really gaining a lot of traction across Europe,
Speaker 1: and in France, the National Front, and that's led by Leapin,
Speaker 1: a forty eight year old lawyer by training. She's one
Speaker 1: of the prime examples. She's pledged that if she's elected president,
Speaker 1: she would take the country out of the European Union
Speaker 1: and the eurocurrency and resurrect France's borders. Economic conditions in
Speaker 1: France are are running in her favor. You've got unemployment
Speaker 1: around ten percent, which is close to a record high.
Speaker 1: The nation's reeling from a series of terror attacks over
Speaker 1: the past year, the migrant crisis of straining Europe. Although
Speaker 1: even with those things, she still isn't actually favor to
Speaker 1: win the French election. But then again, neither were the
Speaker 1: pro Brexit crowd or Trump. And you know, here's another
Speaker 1: great parallel, Lapen is In, another admirer of Russian President
Speaker 1: Vladimir Putin, just like Trump, and both have expressed doubts
Speaker 1: about climate change being caused by humans. Leapin is called
Speaker 1: globalization and I quote another kind of totalitarianism. Joining us
Speaker 1: now to explain the situation in France is Nicolas Veron,
Speaker 1: a former French government advisor who's a scholar at both
Speaker 1: the Brugal think Tank in Brussels and the Peterson Institute
Speaker 1: for International Economics in Washington. He joins us from neither
Speaker 1: of those cities, but actually is in London and stopped
Speaker 1: by our office today. Nicholas, thanks for coming on our show.
Speaker 1: Thanks for having me. So can you first tell us
Speaker 1: a bit about how the National Front got started and
Speaker 1: how Marine Lepine has gone from someone at the fringes
Speaker 1: to someone with what seems like a legitimate chance of
Speaker 1: becoming Francis leader. I think in comparison with Brexit and Trump,
Speaker 1: I think it's important to get the right perspective of
Speaker 1: time and the National Front is not the new movement.
Speaker 1: It didn't appear in the last few years, let alone
Speaker 1: the last few months. It's been around for more than
Speaker 1: thirty years very prominent in the French political landscape, founded
Speaker 1: by Marine Lepine's father, Jean Marie lepan Um, who actually
Speaker 1: made it into a significant political party in the early eighties,
Speaker 1: and Jean Marri Lupin also made it to the second
Speaker 1: round of the French presidential election in April two thousand
Speaker 1: and two, uh to general surprise, he was soundly defeated
Speaker 1: in the second round by Jack At the time, but
Speaker 1: this was a big shock, not unlike what we've seen
Speaker 1: this year in the UK and the US, so it's
Speaker 1: not like we have an entirely new phenomenon. But it
Speaker 1: is also the case that Marion Leapin uh so, the
Speaker 1: party founder's daughter, is a very talented politician in her
Speaker 1: own right, has built momentum for her party with strategies
Speaker 1: that are uh as that have parles with those of
Speaker 1: her father, but also have differences. And uh Indeed, I
Speaker 1: wouldn't expect her to win the election next year, but
Speaker 1: nor did I expect Mr Trump to win the US elections,
Speaker 1: So you shouldn't take my opinion for guidance, Nicholas. Let
Speaker 1: me let's back up for just a moment. How exactly
Speaker 1: does the French presidential election work right. Um, So the
Speaker 1: short answer is it's a two round elections. The two
Speaker 1: rounds are separated by two weeks, so we have a
Speaker 1: first round in late April, second round in early May,
Speaker 1: and in the meantime people make up their minds on
Speaker 1: how they want to voot on the second round. With
Speaker 1: just two candidates, there cannot be more than two in
Speaker 1: the second round. In the first round there can be
Speaker 1: many candidates, and we don't know yet exactly how many,
Speaker 1: but it's probably a dozen or more. So the saying
Speaker 1: in Frances, in the first round people choose whoever they
Speaker 1: like most. In the second round, the eliminate whoever the
Speaker 1: like least. And I think this is likely to apply
Speaker 1: to the election next year. Even so, there are also
Speaker 1: strategic French voters, typically very politically aware, so there some
Speaker 1: will also have tactical or strategic considerations in their voting
Speaker 1: patterns because they wants this also candidate to make it
Speaker 1: to the second round rather than the ones they prefer.
Speaker 1: In absolute terms, that is that a straight popular vote
Speaker 1: in both rounds. Nationwide, Yeah, I think only the US
Speaker 1: has this uh very bizarre system with the electoral college.
Speaker 1: For the first time ever, we have primaries boots for
Speaker 1: the mainstream central right party and for the mainstream central
Speaker 1: left parties. Now, this process of primaries is unprecedented, being
Speaker 1: on the two sides, and means that there are actually
Speaker 1: multiple scenarios for the election, Because I believe it or not,
Speaker 1: there are two rounds of voting for each of the primaries,
Speaker 1: so two rounds for the center right, two rounds for
Speaker 1: the central left, and all these are national votes, so
Speaker 1: we'll get six rounds of voting before we know the
Speaker 1: name of the president, which means that it's very difficult
Speaker 1: to predict exactly where the equation will be for French voters.
Speaker 1: There is also an expectation that important candidates may pop
Speaker 1: up who are neither the center right winner of the
Speaker 1: primary north or central left winner of the primary norm
Speaker 1: Mrs Lupin for example, Emmanuel Macron, a former economics minister,
Speaker 1: is a young, extremely talented politician who is fairly disruptive
Speaker 1: and has just announced the candidacy of his own and
Speaker 1: frankly he has a chance to make it to the
Speaker 1: second round on current expectations. So this is very unpredictable election.
Speaker 1: Lots of resentment against the establishment, also lots of fear
Speaker 1: of chance in France and ambiguity about chance, a change
Speaker 1: in globalizations and the European environment and social and economic
Speaker 1: dynamics influence itself very difficult to know what will come
Speaker 1: out of it. So just a clarify necklace. So exactly
Speaker 1: what has to happen for the pen herself to win?
Speaker 1: I mean, so there's obviously no electoral college, and it's
Speaker 1: just it's just a simple popular vote and that can
Speaker 1: win the election. And who does it depend on who
Speaker 1: the opponent is too? Could she actually win if there's
Speaker 1: a weak opponent or is it likely to produced the
Speaker 1: strongest opponent? Yeah, so she will be the candidate date
Speaker 1: of her party is the National Front. In the first round,
Speaker 1: there will be as I said, a number of other
Speaker 1: candidates in the first round, and on current polling to
Speaker 1: be confirmed of course, don't believe the polls. She is
Speaker 1: likely to make it to the second round and in
Speaker 1: the second round to face off whoever comes first or
Speaker 1: second in the second round. Uh so has the plurality
Speaker 1: of votes apart from the votes she would get into
Speaker 1: sound two. Jack Chirac, who was a sort of mainstream
Speaker 1: central right incumbent, defeated her father by I think more
Speaker 1: than eighty percent of the vote. Uh. This time, the
Speaker 1: expectation is that she probably cannot make it to more
Speaker 1: than fifty in the second round, but she might make
Speaker 1: a very strong showing in that round of voting, and
Speaker 1: therefore lots of uncertainty. It's going to be really interesting
Speaker 1: to watch. We're going to take a break right now
Speaker 1: for a word from our sponsor, and when we're back,
Speaker 1: we're going to talk more about the impacts on the
Speaker 1: economy and the Eurozone. Brought to you by Bank of
Speaker 1: America Merrill Lynch. Seeing what others have seen, but uncovering
Speaker 1: what others may not. Global research that helps you harness
Speaker 1: disruption voted top global research from five years running. Merrill Lynch, Pierce,
Speaker 1: Venner and Smith Incorporated. Welcome back, Nicholas. I want to
Speaker 1: ask you now to talk about more of the economic issues. Uh.
Speaker 1: You know, you had people of the UK voting to
Speaker 1: leave the European Union. Uh. You know, you had Greece
Speaker 1: hanging the balance with its fate in the Eurozone for
Speaker 1: the last several years. What what would happen to the
Speaker 1: euro and the European Union if mrs had won the election? Well, first,
Speaker 1: even so six rounds of voting to get to the
Speaker 1: knowing our president sounds like a lot. It's not the
Speaker 1: end of the sequence because after the presidential election you
Speaker 1: will have a parliamentary election and that will actually determine
Speaker 1: the majority in parliament. And therefore the government, including the
Speaker 1: Prime Minister, which is in the French system, is a
Speaker 1: separate person from the president. So even if Mrs Lupin
Speaker 1: wins as president, it's not to be taken for granted
Speaker 1: that she will have a majority in parliament, so she'll
Speaker 1: have major checks on her power. If if she were
Speaker 1: to win this president well, if it depends on the
Speaker 1: result of the parliamentary election. If she wins the presidency
Speaker 1: and also gets a majority for her party in the parliament,
Speaker 1: and she wouldn't have many checks. She would be very powerful.
Speaker 1: But if she wins the presidency and doesn't win a
Speaker 1: majority in Parliament, then it's not even clear that she
Speaker 1: will have that much of an impact on policy. Well,
Speaker 1: what's the greater chance right now winning the presidency or
Speaker 1: National Front getting a majority in parliament. I think she
Speaker 1: has a much greater chance of winning the presidencies and
Speaker 1: of controlling parliament. But frankly, it's so unprecedented. The idea
Speaker 1: of the National Front, a far right party, non mainstream,
Speaker 1: winning the presidency is that we just don't know, and
Speaker 1: there I'm not aware of any reliable pulling on the
Speaker 1: parliamentary election at this point. They will probably come later
Speaker 1: in the election cycle. But even assuming that she would,
Speaker 1: which I think is not very likely but not impossible,
Speaker 1: that she would control Parliament and therefore be able to
Speaker 1: govern on her platform, it's not even clear in that
Speaker 1: assumption that she would get Friends out of the Eurozone,
Speaker 1: because what she's now saying is that she would seek
Speaker 1: a concerted dismantling of the Eurozone, but by common agreement
Speaker 1: of the different hero Zone countries. In other terms, she's
Speaker 1: not advocating a unilateral withdrawal of Friends. Now, this is
Speaker 1: very Frexit, well exactly basically a commonly agreed break up,
Speaker 1: but not a withdrawal, just a France. So she basically
Speaker 1: what she's saying is, my leadership will allow me to
Speaker 1: convince all the other European member states, including Germanys, that
Speaker 1: the euro is really a bad idea and should be ditched. Now,
Speaker 1: the likelihood of this happening, obviously is very low because
Speaker 1: in most euros own member states, there is a very
Speaker 1: strong support for the Euro. I was yesterday in Portugal
Speaker 1: in in Portugal, believe it or not, after a Troy
Speaker 1: cap problem program and a lot of economic hardship in
Speaker 1: the last few years, support for staying into your zones
Speaker 1: more than nine. And that's not too unusual. In many
Speaker 1: European member states, including Greece, you have very strong majorities
Speaker 1: to keep the Euro. And that's the case in France
Speaker 1: as well. So people like the PEN A number of
Speaker 1: people like the Pan as an anti establishment figure, but
Speaker 1: that doesn't necessarily mean that they take her anti euro
Speaker 1: red week seriously, let alone literally. Well, let's let's take
Speaker 1: another step back and talk about some of the challenges
Speaker 1: that France's economy faces. What what kind of situation is
Speaker 1: it in, you know, what what kind of challenges does
Speaker 1: it have that are unique to the nation, and what
Speaker 1: does France face that that has proved in common with
Speaker 1: much of the rest of Europe. You know, France is
Speaker 1: a bit of the middle of the world country into
Speaker 1: your zoo, and it's not the worst performer, it's not
Speaker 1: the best. It doesn't have problems that are unique, it
Speaker 1: has problems that are shared by a number of other
Speaker 1: member states UH law productivity grows, lots of frigidities into
Speaker 1: the economy and at least the labor market, but also
Speaker 1: the goods and services markets. Not enough competition, not enough
Speaker 1: entry of fast growing firms into established markets UM and
Speaker 1: UH and also rigidities in society, difficulty for people to
Speaker 1: you know, a por social mobilities not what it should be.
Speaker 1: Even so, actually income inequality is much lower than in
Speaker 1: says the US or the UK, and hasn't been growing
Speaker 1: UH and that makes Friends a bit of an outlier. Indeed,
Speaker 1: including in the continental European context, hasn't been growing in
Speaker 1: the last few years. So it needs reform, It needs
Speaker 1: more growth, It needs uh an economic systems that is
Speaker 1: more friendly to investment and corporate development and innovation. But
Speaker 1: I would say none of these problems is extremely acute.
Speaker 1: So it's more like a chronic condition, if you will,
Speaker 1: of insufficient dynamism and insufficient economic vitality riders and specific
Speaker 1: issues that is very, very prominent and specific to that country.
Speaker 1: We're talking now about just over a year after the
Speaker 1: terrible incident at the Battle Clan in Paris, and there
Speaker 1: have been several there's like the one in Niece of
Speaker 1: the past year. Has has that affected people's mindset? Uh,
Speaker 1: you know, both from a political and economic standpoint. It
Speaker 1: has affected the economy because it has affected tourism. Um.
Speaker 1: External perceptions obviously matter in this area. Domestically, I think
Speaker 1: it has added to a sense of gloom and it
Speaker 1: has added to the unpopularity of the government because there
Speaker 1: has been a feeling after several of these attacks, including
Speaker 1: the one on July fourteens this year in this that
Speaker 1: the government wasn't doing everything possible to protect the people
Speaker 1: against this sort of assault. So so it has added
Speaker 1: to the negattivity of public feeling in France. I wouldn't
Speaker 1: necessarily say it has created a whole different political dynamic
Speaker 1: of its own. In a way, it has only reinforced
Speaker 1: skepticism that was already present in the population before this
Speaker 1: wave of attacks started in January two sound fifteen. Now,
Speaker 1: looking at the rest of Europe, or maybe just next
Speaker 1: door at Germany, which is also moving to elections, Chancellor
Speaker 1: Markel's reputation has taken something of a hit or popularity,
Speaker 1: I guess because of the refugee situation. What's the state
Speaker 1: of the movement towards populism and uh, you know, are
Speaker 1: we going to have a similar conversation about Germany next year?
Speaker 1: I don't think so, Frankly. I think the political equations
Speaker 1: in Germany are very different from what they are in France.
Speaker 1: And as I mentioned before, the National Front in France
Speaker 1: is not a new phenomenon. It's been around for more
Speaker 1: than a generation as a strong national protest party. There's
Speaker 1: nothing comparable in Germany. There is a new party's alternative
Speaker 1: for Germany's that is pulling about what the National Front
Speaker 1: was making in France thirty years ago, but it's far
Speaker 1: from being complating a position of national power. And therefore
Speaker 1: I think there is a bit of an easy parallel
Speaker 1: to make in terms of populism gaining everywhere. The reality
Speaker 1: is that the political prospects are very different from one
Speaker 1: European country to another, and there is nothing comparable to
Speaker 1: the possibility of Martin Lepin being president in France. There
Speaker 1: is nothing comparable to that in Germany. At this point,
Speaker 1: Nicholas will have to leave it there. Thank you so
Speaker 1: much for joining us. This has been a really interesting
Speaker 1: and fascinating conversation, and thanks a lot for having me,
Speaker 1: all right, Benchmark will be back next week, and until then,
Speaker 1: you can find us on the Bloomberg Terminal and Bloomberg
Speaker 1: dot com, as well as on iTunes, pocketcasts, and Stitcher.
Speaker 1: While you're there, take a minute to rate and review
Speaker 1: the show so more listeners can find us and let
Speaker 1: us know what you thought of the show. You can
Speaker 1: talk to us and follow us at Twitter. You find
Speaker 1: Scott at Scott Landman. You can find me by Keith Smith.
Speaker 1: And our guest Nicholas is on as well, and you
Speaker 1: can find him at Nicolas Underscore or Not. And it's
Speaker 1: v R O N better on exactly Everything's better in French.
Speaker 1: Thanks for listening, See you next time. Brought to you
Speaker 1: by Bank of America. Merrill Lynch. Seeing what others have seen,
Speaker 1: but uncovering what others may not. Global Research that helps
Speaker 1: You Harness disruption voted top global research from five years running.
Speaker 1: Merrill Lynch, Pierce, Fenner and Smith Incorporated