By Christopher Dembik, Head of Macroeconomic Research at Saxo
 Christopher Dembik |
The social turmoil continues. Videos showing demonstrators chanting around a fire "Louis XVI, Louis XVI, we beheaded him. Macron, Macron, we can do it again” are spreading on social media. Strikes and violent demonstrations are becoming the new normal in Macron’s startup nation. What triggered this social revolt? The government decided to use Article 49.3 of the Constitution – an unpopular though legal mechanism that allows a bill to be adopted without a formal vote in the National Assembly – to pass his signature pension reform. It aims to increase the retirement age from 62 to 64 to fund the redistributive pay-as-you-go system. This triggered anger among part of the population and a feeling of brutality coming from the top.
The ongoing crisis goes beyond discontent against the pension reform. During last weekend, a demonstration organized by the green movement against large water reservoirs used for agricultural purposes ended up in a violent fight with law enforcement and a burnt police vehicle. France is at the edge of an unknown territory once again. The last time it has happened was before Covid, in 2018, when a new gas tax – which was finally not implemented – sparked the Yellow Vest Movement. At that time, many considered it was only an anti-tax movement - as we have seen somewhere else. This was partly true. However, the Yellow Vest Movement was much more than that. It was the consequence of a growing disconnect between urban and rural areas but also between voters and elected officials. Government mistrust temporarily vanished with the Covid crisis (though the anti-vaxx movement was very vocal in France). It is now back with the pension reform. Most French don’t want to work two more years.
Who can blame them? But the current social revolt is not only about pension reform, hard working conditions and a better balance between life and work. This is not a social crisis like the one of 1995 when the center-right Juppé government unsuccessfully tried to pass a pension reform. This sparked a three-week national strike. Now, the legitimacy of the elected officials, especially Macron, and the very principle of the representation of the people by elected officials are being questioned. This is a regime crisis which is not coming from nowhere. It certainly originates from the 2018 Yellow Vest Movement or perhaps even earlier. But it is now reaching a breaking point.
The 2022 presidential election was the last chance for the establishment
The broken social contract has been one of our long-term macro calls for years. Our chief economist, Steen Jakobsen, mentioned it back in 2014-15 the first time. This explains Trump’s election, Brexit and Marine Le Pen’s good chance to become one day France’s next president. This also explains the current regime crisis in France. For years, the political elite tried to find how someone like Trump could win the U.S. presidential election. The point is that it has nothing to do with Trump but all to do with the fact that he is anti-establishment. We could say the same thing about Le Pen (though she has softened her anti-establishment tone to appear more suited for the job). What is currently happening in France is what we have feared for years. Voters (perhaps not most of them but certainly the more vocal) are turning away from the social contract – the basic political theory behind all of today’s societies. Voters want anything but the establishment. In France, Macron’s 2022 election was often portrayed as the establishment’s last chance to avoid voters turning away from government parties.
The least we can say is that Macron has not been very successful until now. Many voters find him insufferable. His original sin is that he never acknowledged that he won the 2022 presidential election not because voters embraced his political platform but because a majority of voters was afraid to have a far-right president. One year later, it is far from certain there would be a majority of voters to prevent Le Pen from being victorious. The pension reform is needed from an economic viewpoint but not THAT pension reform presented THIS way. This antagonizes voters, even within Macron’s party Renaissance. Several loyal MPs confirmed being surprised by the use of Article 49.3, for instance.
Le Pen 2027
What’s next for France? France is the perfect example of the broken social contract. There are rumors Macron could call for snap elections to get out from the current crisis. This has happened in the past. But it was not always a wise choice. In 1997, two years after the strike against the pension reform, the center-right president Chirac dissolved the National Assembly and called for new elections. With this decision, he hoped to regain political momentum. It was a failure. His party lost and he had to work with a left-wing government for five years (1997-2002). It is very unlikely that Macron will commit the same mistake. According to an IFOP poll of 25 March, the NUPES (the left-wing political alliance between the Greens, the Socialists and the far-left) and the National Rally (Le Pen’s party) would be the main winners with 26 % of votes each. Macron’s party would score at 22 %.
This is not that bad. But it is still four points lower than at the 2022 legislative election. The other parties (such as the center right LR which has partly supported the pension reform) would score close or below to 10%. On top of the ongoing social and regime crisis, there would certainly be an institutional crisis. It is hard to know from which party the prime minister would be. The only thing that is certain is that he/she would belong to the anti-establishment. What is happening in France matters for the rest of Europe. High energy prices, widespread inflation, banking stress and so on are pushing voters in the hands of anti-establishment parties (this has already happened in Italy with the Meloni government). I would not have said that a few years ago. But it will also probably happen in France. The likelihood that Le Pen will be France's next president in 2027 is much higher than the NUPES leader Mélenchon's, in my view.
He is rightly viewed as too radical by a majority of voters. His party refused to officially condemn the ongoing violent demonstrations, for instance. Le Pen could be a more suitable vote for many. It is no secret that she has done a fine job to convince business leaders that if she is elected there will be no economic chaos.
