WEBVTT - 64: Make France Great Again

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<v Speaker 1>Brought to you by Bank of America. Merrill Lynch. Seeing

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<v Speaker 1>what others have seen, but uncovering what others may not.

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<v Speaker 1>Global Research that helps you Harness disruption voted top global

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<v Speaker 1>research from five years running Meryll Lynch, Pierce, Fenner, and

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<v Speaker 1>Smith Incorporated. One of the highlights of this week for

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<v Speaker 1>me was going with my family to eat at La

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<v Speaker 1>Madalen for dinner, which is a chain of French restaurants

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<v Speaker 1>in the United States. It's almost They had a chicken

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<v Speaker 1>creep that sounds lovely, and one of my daughters had

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<v Speaker 1>a grilled cheese sand which they really don't vary the

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<v Speaker 1>children's menu restaurants. Hello, and welcome back to Bloomberg Benchmark

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<v Speaker 1>show about the Global Economy. I'm Scott landman and economics

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<v Speaker 1>editor with Bloomberg News in Washington, and I'm Kate Smith,

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<v Speaker 1>an editor with Bloomberg in New York. So, Kate, are

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<v Speaker 1>are you much of a Franco file? Um? You know,

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<v Speaker 1>I've never really been to France, which is a little embarrassing,

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<v Speaker 1>I know, right, But I think everything I've heard about

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<v Speaker 1>French culture, I don't see why I wouldn't like it,

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<v Speaker 1>you know, like the that gets the coffees, the striped shirts,

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<v Speaker 1>the berets. There's a lot to like there, there's a

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<v Speaker 1>lot to like. I've been I've been to France once,

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<v Speaker 1>just for a couple of days, but I don't speak French.

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<v Speaker 1>And you know, one of the highlights of this week

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<v Speaker 1>for me was going with my family to eat at

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<v Speaker 1>La Madalene for dinner, which is a chain of French

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<v Speaker 1>restaurants in the United States. It's almost had a chicken

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<v Speaker 1>creep that sounds lovely, and one of my daughters had

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<v Speaker 1>a grilled cheese sandwich. They really don't vary the children's

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<v Speaker 1>menu in restaurants. That sounds a lot better than the

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<v Speaker 1>sad desk salad that's awaiting me in a few minutes

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<v Speaker 1>after Well. Anyway, that kind of leads into our topic

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<v Speaker 1>for today. You know, you go back to June this year,

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<v Speaker 1>the voters of the United Kingdom gave us Brexit. Then

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<v Speaker 1>Americans decided to elect Donald Trump as president. Now, over

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<v Speaker 1>the next few months, the world is going to turn

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<v Speaker 1>its eyes to France, and they already are in some ways.

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<v Speaker 1>It's it's the sixth biggest economy in the world and

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<v Speaker 1>the third largest in Europe, and it's where a rising

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<v Speaker 1>anti establishment, anti immigrant movement is threatening to deliver another

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<v Speaker 1>blow to those smug global elites who think they know

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<v Speaker 1>it all. Oh man, that the smug global elites, right, Scott,

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<v Speaker 1>they got it coming again. I know, I know, it's

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<v Speaker 1>not just the coastal elites this times, the global elites.

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<v Speaker 1>All right. Well, it's true though, populist anti immigrant movements

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<v Speaker 1>are really they're really gaining a lot of traction across Europe,

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<v Speaker 1>and in France, the National Front, and that's led by Leapin,

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<v Speaker 1>a forty eight year old lawyer by training. She's one

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<v Speaker 1>of the prime examples. She's pledged that if she's elected president,

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<v Speaker 1>she would take the country out of the European Union

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<v Speaker 1>and the eurocurrency and resurrect France's borders. Economic conditions in

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<v Speaker 1>France are are running in her favor. You've got unemployment

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<v Speaker 1>around ten percent, which is close to a record high.

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<v Speaker 1>The nation's reeling from a series of terror attacks over

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<v Speaker 1>the past year, the migrant crisis of straining Europe. Although

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<v Speaker 1>even with those things, she still isn't actually favor to

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<v Speaker 1>win the French election. But then again, neither were the

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<v Speaker 1>pro Brexit crowd or Trump. And you know, here's another

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<v Speaker 1>great parallel, Lapen is In, another admirer of Russian President

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<v Speaker 1>Vladimir Putin, just like Trump, and both have expressed doubts

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<v Speaker 1>about climate change being caused by humans. Leapin is called

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<v Speaker 1>globalization and I quote another kind of totalitarianism. Joining us

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<v Speaker 1>now to explain the situation in France is Nicolas Veron,

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<v Speaker 1>a former French government advisor who's a scholar at both

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<v Speaker 1>the Brugal think Tank in Brussels and the Peterson Institute

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<v Speaker 1>for International Economics in Washington. He joins us from neither

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<v Speaker 1>of those cities, but actually is in London and stopped

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<v Speaker 1>by our office today. Nicholas, thanks for coming on our show.

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<v Speaker 1>Thanks for having me. So can you first tell us

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<v Speaker 1>a bit about how the National Front got started and

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<v Speaker 1>how Marine Lepine has gone from someone at the fringes

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<v Speaker 1>to someone with what seems like a legitimate chance of

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<v Speaker 1>becoming Francis leader. I think in comparison with Brexit and Trump,

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<v Speaker 1>I think it's important to get the right perspective of

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<v Speaker 1>time and the National Front is not the new movement.

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<v Speaker 1>It didn't appear in the last few years, let alone

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<v Speaker 1>the last few months. It's been around for more than

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<v Speaker 1>thirty years very prominent in the French political landscape, founded

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<v Speaker 1>by Marine Lepine's father, Jean Marie lepan Um, who actually

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<v Speaker 1>made it into a significant political party in the early eighties,

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<v Speaker 1>and Jean Marri Lupin also made it to the second

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<v Speaker 1>round of the French presidential election in April two thousand

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<v Speaker 1>and two, uh to general surprise, he was soundly defeated

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<v Speaker 1>in the second round by Jack At the time, but

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<v Speaker 1>this was a big shock, not unlike what we've seen

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<v Speaker 1>this year in the UK and the US, so it's

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<v Speaker 1>not like we have an entirely new phenomenon. But it

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<v Speaker 1>is also the case that Marion Leapin uh so, the

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<v Speaker 1>party founder's daughter, is a very talented politician in her

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<v Speaker 1>own right, has built momentum for her party with strategies

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<v Speaker 1>that are uh as that have parles with those of

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<v Speaker 1>her father, but also have differences. And uh Indeed, I

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<v Speaker 1>wouldn't expect her to win the election next year, but

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<v Speaker 1>nor did I expect Mr Trump to win the US elections,

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<v Speaker 1>So you shouldn't take my opinion for guidance, Nicholas. Let

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<v Speaker 1>me let's back up for just a moment. How exactly

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<v Speaker 1>does the French presidential election work right. Um, So the

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<v Speaker 1>short answer is it's a two round elections. The two

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<v Speaker 1>rounds are separated by two weeks, so we have a

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<v Speaker 1>first round in late April, second round in early May,

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<v Speaker 1>and in the meantime people make up their minds on

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<v Speaker 1>how they want to voot on the second round. With

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<v Speaker 1>just two candidates, there cannot be more than two in

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<v Speaker 1>the second round. In the first round there can be

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<v Speaker 1>many candidates, and we don't know yet exactly how many,

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<v Speaker 1>but it's probably a dozen or more. So the saying

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<v Speaker 1>in Frances, in the first round people choose whoever they

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<v Speaker 1>like most. In the second round, the eliminate whoever the

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<v Speaker 1>like least. And I think this is likely to apply

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<v Speaker 1>to the election next year. Even so, there are also

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<v Speaker 1>strategic French voters, typically very politically aware, so there some

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<v Speaker 1>will also have tactical or strategic considerations in their voting

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<v Speaker 1>patterns because they wants this also candidate to make it

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<v Speaker 1>to the second round rather than the ones they prefer.

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<v Speaker 1>In absolute terms, that is that a straight popular vote

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<v Speaker 1>in both rounds. Nationwide, Yeah, I think only the US

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<v Speaker 1>has this uh very bizarre system with the electoral college.

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<v Speaker 1>For the first time ever, we have primaries boots for

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<v Speaker 1>the mainstream central right party and for the mainstream central

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<v Speaker 1>left parties. Now, this process of primaries is unprecedented, being

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<v Speaker 1>on the two sides, and means that there are actually

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<v Speaker 1>multiple scenarios for the election, Because I believe it or not,

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<v Speaker 1>there are two rounds of voting for each of the primaries,

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<v Speaker 1>so two rounds for the center right, two rounds for

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<v Speaker 1>the central left, and all these are national votes, so

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<v Speaker 1>we'll get six rounds of voting before we know the

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<v Speaker 1>name of the president, which means that it's very difficult

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<v Speaker 1>to predict exactly where the equation will be for French voters.

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<v Speaker 1>There is also an expectation that important candidates may pop

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<v Speaker 1>up who are neither the center right winner of the

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<v Speaker 1>primary north or central left winner of the primary norm

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<v Speaker 1>Mrs Lupin for example, Emmanuel Macron, a former economics minister,

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<v Speaker 1>is a young, extremely talented politician who is fairly disruptive

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<v Speaker 1>and has just announced the candidacy of his own and

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<v Speaker 1>frankly he has a chance to make it to the

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<v Speaker 1>second round on current expectations. So this is very unpredictable election.

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<v Speaker 1>Lots of resentment against the establishment, also lots of fear

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<v Speaker 1>of chance in France and ambiguity about chance, a change

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<v Speaker 1>in globalizations and the European environment and social and economic

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<v Speaker 1>dynamics influence itself very difficult to know what will come

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<v Speaker 1>out of it. So just a clarify necklace. So exactly

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<v Speaker 1>what has to happen for the pen herself to win?

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<v Speaker 1>I mean, so there's obviously no electoral college, and it's

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<v Speaker 1>just it's just a simple popular vote and that can

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<v Speaker 1>win the election. And who does it depend on who

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<v Speaker 1>the opponent is too? Could she actually win if there's

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<v Speaker 1>a weak opponent or is it likely to produced the

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<v Speaker 1>strongest opponent? Yeah, so she will be the candidate date

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<v Speaker 1>of her party is the National Front. In the first round,

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<v Speaker 1>there will be as I said, a number of other

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<v Speaker 1>candidates in the first round, and on current polling to

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<v Speaker 1>be confirmed of course, don't believe the polls. She is

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<v Speaker 1>likely to make it to the second round and in

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<v Speaker 1>the second round to face off whoever comes first or

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<v Speaker 1>second in the second round. Uh so has the plurality

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<v Speaker 1>of votes apart from the votes she would get into

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<v Speaker 1>sound two. Jack Chirac, who was a sort of mainstream

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<v Speaker 1>central right incumbent, defeated her father by I think more

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<v Speaker 1>than eighty percent of the vote. Uh. This time, the

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<v Speaker 1>expectation is that she probably cannot make it to more

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<v Speaker 1>than fifty in the second round, but she might make

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<v Speaker 1>a very strong showing in that round of voting, and

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<v Speaker 1>therefore lots of uncertainty. It's going to be really interesting

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<v Speaker 1>to watch. We're going to take a break right now

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<v Speaker 1>for a word from our sponsor, and when we're back,

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<v Speaker 1>we're going to talk more about the impacts on the

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<v Speaker 1>economy and the Eurozone. Brought to you by Bank of

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<v Speaker 1>America Merrill Lynch. Seeing what others have seen, but uncovering

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<v Speaker 1>what others may not. Global research that helps you harness

0:10:20.920 --> 0:10:25.839
<v Speaker 1>disruption voted top global research from five years running. Merrill Lynch, Pierce,

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<v Speaker 1>Venner and Smith Incorporated. Welcome back, Nicholas. I want to

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<v Speaker 1>ask you now to talk about more of the economic issues. Uh.

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<v Speaker 1>You know, you had people of the UK voting to

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<v Speaker 1>leave the European Union. Uh. You know, you had Greece

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<v Speaker 1>hanging the balance with its fate in the Eurozone for

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<v Speaker 1>the last several years. What what would happen to the

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<v Speaker 1>euro and the European Union if mrs had won the election? Well, first,

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<v Speaker 1>even so six rounds of voting to get to the

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<v Speaker 1>knowing our president sounds like a lot. It's not the

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<v Speaker 1>end of the sequence because after the presidential election you

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<v Speaker 1>will have a parliamentary election and that will actually determine

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<v Speaker 1>the majority in parliament. And therefore the government, including the

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<v Speaker 1>Prime Minister, which is in the French system, is a

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<v Speaker 1>separate person from the president. So even if Mrs Lupin

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<v Speaker 1>wins as president, it's not to be taken for granted

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<v Speaker 1>that she will have a majority in parliament, so she'll

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<v Speaker 1>have major checks on her power. If if she were

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<v Speaker 1>to win this president well, if it depends on the

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<v Speaker 1>result of the parliamentary election. If she wins the presidency

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<v Speaker 1>and also gets a majority for her party in the parliament,

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<v Speaker 1>and she wouldn't have many checks. She would be very powerful.

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<v Speaker 1>But if she wins the presidency and doesn't win a

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<v Speaker 1>majority in Parliament, then it's not even clear that she

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<v Speaker 1>will have that much of an impact on policy. Well,

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<v Speaker 1>what's the greater chance right now winning the presidency or

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<v Speaker 1>National Front getting a majority in parliament. I think she

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<v Speaker 1>has a much greater chance of winning the presidencies and

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<v Speaker 1>of controlling parliament. But frankly, it's so unprecedented. The idea

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<v Speaker 1>of the National Front, a far right party, non mainstream,

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<v Speaker 1>winning the presidency is that we just don't know, and

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<v Speaker 1>there I'm not aware of any reliable pulling on the

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<v Speaker 1>parliamentary election at this point. They will probably come later

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<v Speaker 1>in the election cycle. But even assuming that she would,

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<v Speaker 1>which I think is not very likely but not impossible,

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<v Speaker 1>that she would control Parliament and therefore be able to

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<v Speaker 1>govern on her platform, it's not even clear in that

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<v Speaker 1>assumption that she would get Friends out of the Eurozone,

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<v Speaker 1>because what she's now saying is that she would seek

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<v Speaker 1>a concerted dismantling of the Eurozone, but by common agreement

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<v Speaker 1>of the different hero Zone countries. In other terms, she's

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<v Speaker 1>not advocating a unilateral withdrawal of Friends. Now, this is

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<v Speaker 1>very Frexit, well exactly basically a commonly agreed break up,

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<v Speaker 1>but not a withdrawal, just a France. So she basically

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<v Speaker 1>what she's saying is, my leadership will allow me to

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<v Speaker 1>convince all the other European member states, including Germanys, that

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<v Speaker 1>the euro is really a bad idea and should be ditched. Now,

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<v Speaker 1>the likelihood of this happening, obviously is very low because

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<v Speaker 1>in most euros own member states, there is a very

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<v Speaker 1>strong support for the Euro. I was yesterday in Portugal

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<v Speaker 1>in in Portugal, believe it or not, after a Troy

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<v Speaker 1>cap problem program and a lot of economic hardship in

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<v Speaker 1>the last few years, support for staying into your zones

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<v Speaker 1>more than nine. And that's not too unusual. In many

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<v Speaker 1>European member states, including Greece, you have very strong majorities

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<v Speaker 1>to keep the Euro. And that's the case in France

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<v Speaker 1>as well. So people like the PEN A number of

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<v Speaker 1>people like the Pan as an anti establishment figure, but

0:13:55.400 --> 0:13:59.480
<v Speaker 1>that doesn't necessarily mean that they take her anti euro

0:13:59.679 --> 0:14:03.960
<v Speaker 1>red week seriously, let alone literally. Well, let's let's take

0:14:04.000 --> 0:14:07.320
<v Speaker 1>another step back and talk about some of the challenges

0:14:07.440 --> 0:14:11.800
<v Speaker 1>that France's economy faces. What what kind of situation is

0:14:11.840 --> 0:14:13.920
<v Speaker 1>it in, you know, what what kind of challenges does

0:14:14.000 --> 0:14:17.160
<v Speaker 1>it have that are unique to the nation, and what

0:14:17.320 --> 0:14:21.200
<v Speaker 1>does France face that that has proved in common with

0:14:22.240 --> 0:14:24.880
<v Speaker 1>much of the rest of Europe. You know, France is

0:14:24.920 --> 0:14:26.920
<v Speaker 1>a bit of the middle of the world country into

0:14:27.040 --> 0:14:29.440
<v Speaker 1>your zoo, and it's not the worst performer, it's not

0:14:29.560 --> 0:14:33.880
<v Speaker 1>the best. It doesn't have problems that are unique, it

0:14:34.000 --> 0:14:36.040
<v Speaker 1>has problems that are shared by a number of other

0:14:36.160 --> 0:14:41.880
<v Speaker 1>member states UH law productivity grows, lots of frigidities into

0:14:41.880 --> 0:14:44.120
<v Speaker 1>the economy and at least the labor market, but also

0:14:44.280 --> 0:14:48.240
<v Speaker 1>the goods and services markets. Not enough competition, not enough

0:14:49.160 --> 0:14:53.920
<v Speaker 1>entry of fast growing firms into established markets UM and

0:14:54.360 --> 0:14:58.760
<v Speaker 1>UH and also rigidities in society, difficulty for people to

0:14:59.120 --> 0:15:01.880
<v Speaker 1>you know, a por social mobilities not what it should be.

0:15:01.960 --> 0:15:05.680
<v Speaker 1>Even so, actually income inequality is much lower than in

0:15:06.240 --> 0:15:08.880
<v Speaker 1>says the US or the UK, and hasn't been growing

0:15:09.560 --> 0:15:12.040
<v Speaker 1>UH and that makes Friends a bit of an outlier. Indeed,

0:15:12.120 --> 0:15:15.880
<v Speaker 1>including in the continental European context, hasn't been growing in

0:15:16.000 --> 0:15:21.200
<v Speaker 1>the last few years. So it needs reform, It needs

0:15:21.240 --> 0:15:25.400
<v Speaker 1>more growth, It needs uh an economic systems that is

0:15:25.480 --> 0:15:31.200
<v Speaker 1>more friendly to investment and corporate development and innovation. But

0:15:31.400 --> 0:15:34.600
<v Speaker 1>I would say none of these problems is extremely acute.

0:15:34.720 --> 0:15:38.160
<v Speaker 1>So it's more like a chronic condition, if you will,

0:15:38.280 --> 0:15:44.160
<v Speaker 1>of insufficient dynamism and insufficient economic vitality riders and specific

0:15:44.240 --> 0:15:49.320
<v Speaker 1>issues that is very, very prominent and specific to that country.

0:15:49.920 --> 0:15:53.480
<v Speaker 1>We're talking now about just over a year after the

0:15:54.240 --> 0:15:58.400
<v Speaker 1>terrible incident at the Battle Clan in Paris, and there

0:15:58.440 --> 0:16:01.800
<v Speaker 1>have been several there's like the one in Niece of

0:16:02.000 --> 0:16:06.200
<v Speaker 1>the past year. Has has that affected people's mindset? Uh,

0:16:06.600 --> 0:16:10.000
<v Speaker 1>you know, both from a political and economic standpoint. It

0:16:10.120 --> 0:16:14.720
<v Speaker 1>has affected the economy because it has affected tourism. Um.

0:16:15.120 --> 0:16:19.880
<v Speaker 1>External perceptions obviously matter in this area. Domestically, I think

0:16:19.960 --> 0:16:22.120
<v Speaker 1>it has added to a sense of gloom and it

0:16:22.280 --> 0:16:27.440
<v Speaker 1>has added to the unpopularity of the government because there

0:16:27.560 --> 0:16:30.440
<v Speaker 1>has been a feeling after several of these attacks, including

0:16:30.480 --> 0:16:33.760
<v Speaker 1>the one on July fourteens this year in this that

0:16:33.880 --> 0:16:37.760
<v Speaker 1>the government wasn't doing everything possible to protect the people

0:16:37.840 --> 0:16:42.760
<v Speaker 1>against this sort of assault. So so it has added

0:16:42.840 --> 0:16:47.400
<v Speaker 1>to the negattivity of public feeling in France. I wouldn't

0:16:47.960 --> 0:16:51.800
<v Speaker 1>necessarily say it has created a whole different political dynamic

0:16:51.920 --> 0:16:55.280
<v Speaker 1>of its own. In a way, it has only reinforced

0:16:55.880 --> 0:17:00.480
<v Speaker 1>skepticism that was already present in the population before this

0:17:00.640 --> 0:17:04.560
<v Speaker 1>wave of attacks started in January two sound fifteen. Now,

0:17:04.680 --> 0:17:09.200
<v Speaker 1>looking at the rest of Europe, or maybe just next

0:17:09.240 --> 0:17:14.480
<v Speaker 1>door at Germany, which is also moving to elections, Chancellor

0:17:14.560 --> 0:17:20.320
<v Speaker 1>Markel's reputation has taken something of a hit or popularity,

0:17:20.400 --> 0:17:24.760
<v Speaker 1>I guess because of the refugee situation. What's the state

0:17:24.800 --> 0:17:27.879
<v Speaker 1>of the movement towards populism and uh, you know, are

0:17:27.920 --> 0:17:31.440
<v Speaker 1>we going to have a similar conversation about Germany next year?

0:17:31.800 --> 0:17:34.800
<v Speaker 1>I don't think so, Frankly. I think the political equations

0:17:34.880 --> 0:17:37.280
<v Speaker 1>in Germany are very different from what they are in France.

0:17:37.359 --> 0:17:40.320
<v Speaker 1>And as I mentioned before, the National Front in France

0:17:40.440 --> 0:17:42.720
<v Speaker 1>is not a new phenomenon. It's been around for more

0:17:42.800 --> 0:17:48.560
<v Speaker 1>than a generation as a strong national protest party. There's

0:17:48.600 --> 0:17:51.399
<v Speaker 1>nothing comparable in Germany. There is a new party's alternative

0:17:51.440 --> 0:17:55.080
<v Speaker 1>for Germany's that is pulling about what the National Front

0:17:55.240 --> 0:17:58.560
<v Speaker 1>was making in France thirty years ago, but it's far

0:17:58.800 --> 0:18:03.720
<v Speaker 1>from being complating a position of national power. And therefore

0:18:04.080 --> 0:18:07.080
<v Speaker 1>I think there is a bit of an easy parallel

0:18:07.160 --> 0:18:11.160
<v Speaker 1>to make in terms of populism gaining everywhere. The reality

0:18:11.280 --> 0:18:14.720
<v Speaker 1>is that the political prospects are very different from one

0:18:14.760 --> 0:18:18.159
<v Speaker 1>European country to another, and there is nothing comparable to

0:18:18.359 --> 0:18:21.399
<v Speaker 1>the possibility of Martin Lepin being president in France. There

0:18:21.480 --> 0:18:24.000
<v Speaker 1>is nothing comparable to that in Germany. At this point,

0:18:24.840 --> 0:18:26.879
<v Speaker 1>Nicholas will have to leave it there. Thank you so

0:18:27.080 --> 0:18:29.440
<v Speaker 1>much for joining us. This has been a really interesting

0:18:29.520 --> 0:18:32.520
<v Speaker 1>and fascinating conversation, and thanks a lot for having me,

0:18:33.080 --> 0:18:36.360
<v Speaker 1>all right, Benchmark will be back next week, and until then,

0:18:36.440 --> 0:18:38.880
<v Speaker 1>you can find us on the Bloomberg Terminal and Bloomberg

0:18:38.960 --> 0:18:42.199
<v Speaker 1>dot com, as well as on iTunes, pocketcasts, and Stitcher.

0:18:42.560 --> 0:18:44.639
<v Speaker 1>While you're there, take a minute to rate and review

0:18:44.680 --> 0:18:47.040
<v Speaker 1>the show so more listeners can find us and let

0:18:47.160 --> 0:18:48.639
<v Speaker 1>us know what you thought of the show. You can

0:18:48.720 --> 0:18:51.200
<v Speaker 1>talk to us and follow us at Twitter. You find

0:18:51.240 --> 0:18:54.600
<v Speaker 1>Scott at Scott Landman. You can find me by Keith Smith.

0:18:55.080 --> 0:18:56.680
<v Speaker 1>And our guest Nicholas is on as well, and you

0:18:56.760 --> 0:19:00.200
<v Speaker 1>can find him at Nicolas Underscore or Not. And it's

0:19:00.320 --> 0:19:06.480
<v Speaker 1>v R O N better on exactly Everything's better in French.

0:19:07.080 --> 0:19:14.920
<v Speaker 1>Thanks for listening, See you next time. Brought to you

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