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A ‘Reasonably Optimistic’ Take on the French Election Surprise · Stephanomics

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
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Speaker 2: Hello and welcome to another special episode of voter Nomics,
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Speaker 2: the Bloomberg Podcast where politics and markets collide. I'm Stephanie Flanders,
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Speaker 2: head of Economics and Government at Bloomberg, and this morning
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Speaker 2: we have another historic election. A few days ago it
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Speaker 2: was in the UK. This time it's in France and
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Speaker 2: historic in a rather different way. We are in Paris
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Speaker 2: the morning after French voters surprised the world by not
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Speaker 2: granting Marine Le Penz Rassan party the largest number of
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Speaker 2: seats in the French Parliament. Instead, her far right grouping
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Speaker 2: came third, it looks like, and the new Popular Front
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Speaker 2: on the left came first. So we have investors financial
1:02
Speaker 2: markets who were priced for a far right victory but
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Speaker 2: probably a logjam in parliament. Instead we got a far
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Speaker 2: left victory but probably a logjam in parliament. And so far,
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Speaker 2: the way they've digested that result is to have the
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Speaker 2: euro a bit weaker, but if anything, interestingly, a slight
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Speaker 2: strengthening in French bonds relative to Germany. We'll see if
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Speaker 2: that lasts as people start to realize quite how uncertain
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Speaker 2: the future of the government is, and we're going to
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Speaker 2: cut through that fog of uncertainty just a little bit
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Speaker 2: over the next thirty forty minutes or so, here in
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Speaker 2: the atrium of Bloomberg's Paris Bureau, with some very smart
1:47
Speaker 2: and distinguished guests from the Bloomberg Brains Trust. Starting on
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Speaker 2: my far left, we have leonell Lon, known to many
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Speaker 2: of you a Bloomberg opinion columnist writing about the future
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Speaker 2: of money and the future of Europe, based here in Paris.
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Speaker 2: And Eleonora Marvuedi, who is the economist for Bloomberg Economics,
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Speaker 2: part of the economic research group that I run as
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Speaker 2: part of the economics and government coverage at Bloomberg. She's
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Speaker 2: also in Paris, and she's worked at pretty much all
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Speaker 2: the big places OECD, Bank of England, I m F
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Speaker 2: and World Bank, and joining them a very special guest
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Speaker 2: who constitutes the brains Trust all when he's sitting by himself,
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Speaker 2: Jean Clantrichet, obviously former European Central Bank President, Bank of
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Speaker 2: France governor, long standing chair of the Group of Thirty,
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Speaker 2: the Royal Institute in Brussels, and many other things.
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Speaker 3: We have.
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Speaker 2: A very kind audience here at what I was told
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Speaker 2: was a slightly earlier hour for Parisian. So I thank
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Speaker 2: you for coming in. In return, you get to ask
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Speaker 2: some questions, I promise, but I must start with you.
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Speaker 2: Jean Crotrichet, analyst, sent me their response to last night's
3:04
Speaker 2: results late last night with just a three word subject
3:08
Speaker 2: for the email. What a mess is that about? Right?
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Speaker 2: Or should we be reassured and pleased by this outcome?
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Speaker 4: I think it would have been a real mess. If
3:20
Speaker 4: the we have had an absolute majority, there would have
3:24
Speaker 4: been a total mess. If the new popular font would
3:30
Speaker 4: have had an absolute majority, it would also be really
3:33
Speaker 4: a mess. So we are in a situation where things
3:38
Speaker 4: are much better than the mess I was mentioning mess.
3:42
Speaker 4: I was mentioning that being said, of course, we have
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Speaker 4: a Hong Parliament, which is a complex Hong parliament with
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Speaker 4: a three third one third being clearly with a program
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Speaker 4: which is very very aggressive, I would say, in some
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Speaker 4: respect in terms of economic analysis, center in the second position,
4:07
Speaker 4: who we know him and we know what could be
4:12
Speaker 4: done by the Center, but he's not in the position
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Speaker 4: of being the first parliamentary force. And then we have
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Speaker 4: the number three, namely the extreme right. So that being said,
4:25
Speaker 4: if we were in another country, we would say, okay,
4:29
Speaker 4: let's compute. Where do we stand. Ah, we have an
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Speaker 4: absolute majority center plus the Republica so I would say
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Speaker 4: Republican Right and plus the Party Socialist. It's a governmental party,
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Speaker 4: proved that he was able to govern France, and so
4:47
Speaker 4: of course, so why not having this kind of coalition.
4:52
Speaker 4: Of course, we are in France, we are not used
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Speaker 4: to that. We are not in a position to demonstrate
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Speaker 4: to our own people that it would be the right
5:00
Speaker 4: way to proceed. So we will see what happens. But
5:03
Speaker 4: it is obviously complex. Even if virtually I see this
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Speaker 4: possible majority.
5:10
Speaker 2: You have all your years of experience, and then you
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Speaker 2: also have your hope of what happens for France and
5:18
Speaker 2: for Europe over the next few years. As a result
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Speaker 2: of this, what do you hope will happen in the
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Speaker 2: next few and what do you expect to happen.
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Speaker 4: As a citizen? I hope that after due meditation, discussion,
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Speaker 4: assessment of the various possibilities, this idea that all taken
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Speaker 4: into account, an alliance of political might that has the
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Speaker 4: experience of government in France, namely the as I said,
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Speaker 4: the Party Socialist, and maybe the gains. On the one hand,
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Speaker 4: the republican republican right, as I said, and the Center
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Speaker 4: could finally have the possibility of governing the country. It's
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Speaker 4: very complex programs we are signed here and there, and
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Speaker 4: I expect that it would be a long process. But
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Speaker 4: in my opinion as a French citizen, it would certainly
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Speaker 4: be something which would not be abnormal in comparison with
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Speaker 4: all the other European democracies and would permit the country
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Speaker 4: to be governed in a responsible fashion.
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Speaker 2: You were saying to Francine, I think last week for
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Speaker 2: Bloomberg that you didn't think the US was France was
6:34
Speaker 2: well suited to a technocratic government in the style of
6:40
Speaker 2: Monty government in all drug e governments in Italy. But
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Speaker 2: that would seem to be at least one possibility coming out.
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Speaker 4: Of this in politics you should never send ever, of course, nevertheless,
6:54
Speaker 4: it is not at all in the French condition. So
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Speaker 4: I maintained what I told Francie. I think that it
7:00
Speaker 4: is not likely at all that we could have some
7:04
Speaker 4: kind of technocratic government in Italy. You not only had
7:08
Speaker 4: Monty and Dagie, you also had President of the Republics
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Speaker 4: that we are coming from the Central Bank, and you
7:15
Speaker 4: had the succession of Prime Minister and then President of
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Speaker 4: the Republic. I mean, it's it's a strong tradition in Italy,
7:22
Speaker 4: taking into account the complexity of the political life in Italy,
7:26
Speaker 4: taking also into account that there is a place in
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Speaker 4: Roma where you have a very very strong techno structure,
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Speaker 4: which is the Central Bank, and this is recognized by
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Speaker 4: all political parties, by the people of Italy. So we
7:42
Speaker 4: are not in this position. The reason why I don't
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Speaker 4: expect that we could have such but as I said,
7:49
Speaker 4: never said never, and.
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Speaker 2: In your in your old jobs, you would have been
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Speaker 2: particularly the ECP, you would be wondering about the fiscal
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Speaker 2: financial implications of this uncertainty, and also what it tells
8:01
Speaker 2: us about the direction of French politics and what is
8:05
Speaker 2: going to be possible for President Macron or any future government.
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Speaker 2: I mean, is the underlying message that this is a
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Speaker 2: government that's going to borrow more and do less to
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Speaker 2: get its public finances and control and less in the
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Speaker 2: way of the business reforms that President Macron was supposed
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Speaker 2: to be forging.
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Speaker 4: First of all, I expect, of course that now that
8:29
Speaker 4: we know the result, the idea that we could embark
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Speaker 4: on a program that would aggravate the situation in the
8:40
Speaker 4: fiscal side that would aggravate the situation in many respect
8:45
Speaker 4: as regards to the credit worthiness. If I may of
8:48
Speaker 4: the country would appear not being visible at all. So
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Speaker 4: I expect a maturing process from now on that we
8:57
Speaker 4: know that we have the results the programs. And it
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Speaker 4: was the case of the extreme right program, it's also
9:06
Speaker 4: the case of the extra of the left program, the
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Speaker 4: new for popular we have their programs that are not feasible.
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Speaker 4: Frankly speaking, and in my opinion, in my expert opinion,
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Speaker 4: I'm speaking like an expert, not a French citizen. There
9:21
Speaker 4: I don't think at all that it would be in
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Speaker 4: any respect reasonable to embark into new spendings. We have
9:28
Speaker 4: no room from a new that's my clear diagnosis. So
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Speaker 4: I expect that being in a position of responsibility, we
9:38
Speaker 4: will see a dramatic realization by the which a political
9:44
Speaker 4: men and women in the question that it would be
9:47
Speaker 4: a catastrophe for the country to embark on additional massive spending.
9:52
Speaker 2: So that editation, which sounds like a warning.
9:56
Speaker 4: It's my expectations, it's my hope. Also it's a warning certainly,
10:02
Speaker 4: but the warning is there. I mean, you don't need
10:05
Speaker 4: any warning you have a situation that you have to
10:07
Speaker 4: be responsible in the situation.
10:10
Speaker 2: NL will this be taken as a warning, as an
10:14
Speaker 2: excuse or a pressure to mature, as Jean Proteiche is
10:20
Speaker 2: hoping advising.
10:22
Speaker 5: So I think what makes this a bit complicated is
10:24
Speaker 5: that even though some parties are saying that they won selection,
10:28
Speaker 5: I think it's pretty obvious that this was a vote
10:30
Speaker 5: against the penn a vote against certain scenarios, but it
10:34
Speaker 5: was not for anyone. Nobody has an absolute majority, so
10:36
Speaker 5: I think it's frankly exaggerated to imagine as you hear
10:39
Speaker 5: some on the far left immediately saying, this is a
10:41
Speaker 5: vote for our program. So I think programs are going
10:44
Speaker 5: to have to be fluid. I think there's no way
10:46
Speaker 5: of getting around it. I also think that my hope
10:50
Speaker 5: is that given the kind of extraordinary cynicism almost of
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Speaker 5: the way so these coalitions were constructed, whether it is
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Speaker 5: the far left, which was a real idea logical rainbow
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Speaker 5: that was frankly almost untenable, and also in the center
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Speaker 5: with this tactical voting in the middle, I am hopeful
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Speaker 5: that there is going to have to be some reckoning
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Speaker 5: on the program that comes out of a future coalition.
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Speaker 5: There are the numbers for something approaching I don't want
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Speaker 5: to jinx it. That's something like starmerism, where you have
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Speaker 5: the Center plus the Greens and the Socialists. The numbers
11:23
Speaker 5: are there, even if the spirit may not be. So
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Speaker 5: I think there is scope to imagine extremes being turned down.
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Speaker 5: My concern is that the campaign itself was really not
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Speaker 5: what I would consider to be a good campaign. It
11:39
Speaker 5: was full of I mean, even setting aside the whole
11:42
Speaker 5: fake news, there was fake history. There was lots of
11:44
Speaker 5: strange calls to you felt like you were voting for
11:47
Speaker 5: the nineteen thirty of the nineteen forties or nineteen eighties.
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Speaker 5: There was a very little discussion about policy. So I
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Speaker 5: think we may get into a situation where the reckoning
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Speaker 5: of the parties and the elites comes a bit quicker
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Speaker 5: than the reckoning for the voters. It could be quite unstable,
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Speaker 5: and yes it may not last more than a year
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Speaker 5: when it comes time to put a budget together. But
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Speaker 5: right now I'm definitely more hopeful than I was a couple.
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Speaker 3: Of days ago.
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Speaker 2: Well, that's interesting about where we could be in a
12:11
Speaker 2: year's time, which I want to go to in a minute.
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Speaker 2: But eleanor just to say that paint the scene for
12:15
Speaker 2: us a little bit about how much leeway there would be.
12:18
Speaker 2: I mean, Jean Claude is suggesting that the reality will
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Speaker 2: become quite clear that they would be unable to implement
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Speaker 2: certainly seriously expensive policies for the year. But what is
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Speaker 2: the situation that France is in and how much room
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Speaker 2: for maneuver is there.
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Speaker 1: On that food Well, the situation is France's public finances
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Speaker 1: are strained, that is, high, deficit is widen, interest payments
12:43
Speaker 1: are increasing. It's already considered to be under the excessive
12:48
Speaker 1: deficit procedure of the.
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Speaker 2: EU, violating the borrowing rules of the European Union exactly.
12:54
Speaker 1: So deficit is lower than it's higher than three percent
12:58
Speaker 1: and debt is increasing. So the previous government or still
13:03
Speaker 1: current government this morning, has put together a very ambitious
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Speaker 1: program to try to tackle these problems and decrease a
13:12
Speaker 1: deficit by twenty twenty seven and comply partially with their rules.
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Speaker 1: This being highly questioned because it's very ambitious, but it
13:19
Speaker 1: was always the right direction. Now our viue is which
13:23
Speaker 1: whichever coalision or type of government comes in power, there
13:26
Speaker 1: is likely little effort to do any physical consolidation. So
13:30
Speaker 1: the best will stay at the current baseline, which already
13:34
Speaker 1: violates in the US. Now in the case of left
13:40
Speaker 1: centric government, likely the sent the left willing systems some
13:45
Speaker 1: fiscal spending, but it will have to be much more
13:48
Speaker 1: moderate than the full NFP program. So for example, what
13:53
Speaker 1: we estimate the NFP program could cost almost three percent
13:56
Speaker 1: of GDP annually, and that would be the freeze the
14:00
Speaker 1: deficits substantially by six bringing it to six point two
14:03
Speaker 1: percent by twenty twenty seven, far away from the roofs.
14:08
Speaker 1: So we if the spending is down to zero point
14:11
Speaker 1: five percent of GDP, still that will have keep the
14:15
Speaker 1: deficit wider than three percent and increase the debt to GDP.
14:18
Speaker 1: So overall, although there is a little room for any
14:22
Speaker 1: any fiscal spending, there is likely that there would be
14:26
Speaker 1: some to keep everybody having a codition.
14:36
Speaker 2: Bringing this grouping together and the kind of coalition building
14:40
Speaker 2: or the sort of alliance that was forged last week.
14:43
Speaker 2: Quite a few of mcfar's reforms were already put on hold,
14:47
Speaker 2: including the pension reform. I mean, if you are you're
14:50
Speaker 2: in the business community wondering about the underlying potential of France,
14:55
Speaker 2: and so it's not One of the most important things
14:58
Speaker 2: is sort of the long term, long term growth and
15:00
Speaker 2: what that enables. Should that be the concern that even
15:04
Speaker 2: with the maturing, even without expensive price tax, you won't
15:08
Speaker 2: get difficult reforms either.
15:10
Speaker 4: What I have to recognize is that during the seven
15:13
Speaker 4: years of Macro and successive governments, we had quite good
15:19
Speaker 4: policy as regards the micro economics. The I would say
15:24
Speaker 4: attractiveness of the country, the new investment and so forth.
15:29
Speaker 4: The diminishing of the unemployment has been quite spectacular. So
15:34
Speaker 4: this part of the policies were in my opinion, very
15:40
Speaker 4: much on the positive side. The problem was the I
15:43
Speaker 4: would say, public spendings. What you just said, the way
15:48
Speaker 4: we are not respecting the rules of Europe and also
15:54
Speaker 4: the companies and with other countries that we're behaving quite
15:58
Speaker 4: properly because they had a crisis after demand bother. So
16:02
Speaker 4: that makes a mixed picture. If I may, it would
16:07
Speaker 4: be in my opinion, extremely bad. Taking into account the
16:11
Speaker 4: starting point to have additional new spendings, you could imagine
16:17
Speaker 4: to have some kind of measures that we will not
16:21
Speaker 4: be new spendings, but we would give certain satisfaction to
16:25
Speaker 4: what I would say, qualify a Republican responsibility responsibilible left
16:33
Speaker 4: and you see what I mean there. So it seems
16:37
Speaker 4: to me that it's not totally impossible not to aggravate
16:40
Speaker 4: the situation, which would be in any case very very bad,
16:44
Speaker 4: because again, there is no home for maneuvering. And I
16:48
Speaker 4: expect that the realization that there is no room for
16:51
Speaker 4: maneuvering will progressively permit all the political parties leadership to
16:58
Speaker 4: understand that they have no room for manewary, whatever their affiliation,
17:04
Speaker 4: and including when they have signed a program on the
17:08
Speaker 4: left side which is obviously extraordinay ball and obviously extraordinary
17:14
Speaker 4: out of the situation taking into account again the starting point.
17:19
Speaker 2: Yes, So eleanor do you think in terms of just
17:22
Speaker 2: the cost of the micro slippage and the macro slippage.
17:26
Speaker 1: Well, I think that if we look at the program
17:29
Speaker 1: in the NFP, there is a lot of suggestion to
17:32
Speaker 1: increased spending on public services, to increase transfers, also reversed
17:38
Speaker 1: the pension reform and partially will be funded by increased axis.
17:43
Speaker 1: What we see is that, yeah, there will be some
17:45
Speaker 1: bushting and GDP in the short term because of increased
17:48
Speaker 1: pending there's no parts on investments that will have longer
17:51
Speaker 1: term impacts on the potential. Also, a reversal of the
17:55
Speaker 1: pension reform and increasing labor costs could also harm the
17:58
Speaker 1: labor supply. The other potsop is that they clearly stated
18:04
Speaker 1: they're not willing to comply with the austerity rules of
18:06
Speaker 1: the EU. So to what extent the whole NFB will
18:09
Speaker 1: stand behind this statement will determine how much they will
18:13
Speaker 1: moderate their policies.
18:14
Speaker 2: I mean, the worry would be that a majority of
18:17
Speaker 2: the French people have voted for radical, extreme solutions of
18:21
Speaker 2: one kind or another last night, and if we end
18:25
Speaker 2: up with a quote unquote reassuring combination, which is matured,
18:31
Speaker 2: which is realized, there's no room for maneuver on many
18:33
Speaker 2: of these things. The risk is that the French voters
18:37
Speaker 2: draw the conclusion that they have to vote even more
18:39
Speaker 2: emphatically for extreme because they've just ended up with the
18:42
Speaker 2: same thing they didn't the one thing they didn't want
18:45
Speaker 2: was a continuation of what they had. Would be the argument,
18:48
Speaker 2: I mean, Leonel, what are the risks of.
18:51
Speaker 5: That they're obviously present? That's true, I think though that
18:56
Speaker 5: I mean, it's interesting to me that certain figures are
18:59
Speaker 5: making it come back. Francois Land, who arguably pushed through
19:03
Speaker 5: some of the reforms that Macworn benefited from, has now
19:06
Speaker 5: made a kind of political comeback of sorts and is
19:08
Speaker 5: even speaking out against me in Oshal, telling him to
19:11
Speaker 5: keep quiet for for the sake of the left. Now,
19:13
Speaker 5: obviously the left has changed, and I don't think it
19:16
Speaker 5: would be the same kind of left if Hansoiland was
19:19
Speaker 5: to get a position of power. But I think the
19:21
Speaker 5: constraints that we're talking about are real, they will be felt.
19:24
Speaker 5: Maybe this this technocratic idea, even if a technocratic government
19:28
Speaker 5: is definitely not on the cards and not a normal
19:31
Speaker 5: French solution, it would be interesting to me if certain positions,
19:35
Speaker 5: if there was a desire to reach out and find
19:38
Speaker 5: certain a political figures, maybe former central bank governments I
19:42
Speaker 5: don't know present company accepted, but people who do have
19:44
Speaker 5: credibility in certain areas like the economy, to ease some
19:49
Speaker 5: of these tensions, because even beyond fiscal spending, there are
19:53
Speaker 5: deep seated problems in France productivity, innovation, demographics. I mean,
19:58
Speaker 5: these are these are real and if we have no
20:01
Speaker 5: ambition and it's just a government of convenience, that says
20:04
Speaker 5: let's cut here and spend a bit there, We're not
20:07
Speaker 5: going to solve it. So I hope again, my hope
20:09
Speaker 5: is that at some point the politics does have to
20:12
Speaker 5: take a bike a step back on some areage.
20:14
Speaker 2: I guess strong plot. We should just check it. You available, No,
20:19
Speaker 2: I noticed that you are almost exactly the same age
20:21
Speaker 2: as Joe Biden. For you, don't you think that there
20:29
Speaker 2: has to be some I mean, if you would say,
20:32
Speaker 2: and I think that Marie Napenn would say this, and
20:35
Speaker 2: indeed we should remember she got the same share of
20:37
Speaker 2: the vote as Kastama's Labor Party. People have voted for change,
20:43
Speaker 2: and if you're trying to respond to that and trying
20:45
Speaker 2: to prevent a move to the extremes, whether it's in
20:48
Speaker 2: a year or an extreme government within a year or
20:52
Speaker 2: within three years. Is the lesson of this that at
20:56
Speaker 2: some level there has to be a shift to the left.
20:58
Speaker 2: I mean, that's partly what leone saying. I mean, what
21:00
Speaker 2: would be a symbolic but significant move that could be
21:07
Speaker 2: made as that sort of olive branch to the voters
21:11
Speaker 2: who actually feel something has to change.
21:13
Speaker 4: The main problem is that, as we said, the country
21:17
Speaker 4: looks like being divided in three thirds, and two of
21:22
Speaker 4: the extreme thirds are totally at odds. So we are
21:25
Speaker 4: not in a situation where you can say the people
21:28
Speaker 4: wants changes and we will give them changes, because the
21:33
Speaker 4: changes in question are exactly at the opposite on major,
21:38
Speaker 4: major major points. So we are bound. And it's more
21:44
Speaker 4: one of the first time with the Fifth Republic to
21:46
Speaker 4: find out a way to get from that position. And
21:51
Speaker 4: my hope, as I said, is that if you take
21:55
Speaker 4: the Republican component of the Parliament, you have the theoretical
22:01
Speaker 4: possibility of having something which would be representative of the
22:07
Speaker 4: people because it represents something like a little bit more
22:11
Speaker 4: than the absolute majority when you add up to the
22:13
Speaker 4: Republicans on the one hand, and the Socialist Party is
22:17
Speaker 4: said to oversimplify on the other hand. So again everybody
22:22
Speaker 4: now has to reflect mature, as I said, make up
22:26
Speaker 4: his mind, not only of course, the leadership of the
22:29
Speaker 4: political parties, but the people of France. The people of France,
22:33
Speaker 4: they are not stupid. They prove that they were not stupid.
22:36
Speaker 4: They want to changes, but not to that extreme that
22:39
Speaker 4: they would have rocked totally the boat. So they might
22:43
Speaker 4: reflect themselves on what is happening and I also would
22:48
Speaker 4: bet on the common sense and the responsible I would say,
22:52
Speaker 4: attitude of our own Fero citizens.
22:56
Speaker 2: Leona, what do you think of the solution, particularly bringing
22:58
Speaker 2: with the Republicans who were not necessarily the great winners
23:02
Speaker 2: of last night's election. How do you think that people
23:05
Speaker 2: would respond to that?
23:07
Speaker 3: I think it's tough.
23:08
Speaker 5: I do wonder though, what if we had to find
23:10
Speaker 5: a lowest common denominator between all of these parties, what
23:12
Speaker 5: would it be? I mean, I think clearly taxation, right,
23:15
Speaker 5: taxes are going up, there's going to have to be
23:17
Speaker 5: some kind of concession right on on the wealth tax,
23:21
Speaker 5: on you know, some of the some of the tax
23:23
Speaker 5: proposals on on reforms. I just can't see the pension
23:28
Speaker 5: reform being rolled back. But already Gabriel Attal who's proven
23:31
Speaker 5: to be the comeback kid and the real political discovery
23:35
Speaker 5: of this, of this whole saga, because he has fecually
23:39
Speaker 5: broken with Maccorn, emancipating himself from Macorn to build this
23:42
Speaker 5: potentially this coalition. And he was the one apparently who
23:45
Speaker 5: said well let's let's suspend this welfare benefit reformers as
23:48
Speaker 5: a gest to the left. So there are gestures to
23:50
Speaker 5: make I think even even with with with le Penn
23:54
Speaker 5: there was it wasn't even extreme change, right. The whole
23:57
Speaker 5: bet was that there'd be some melonification, that she would
24:00
Speaker 5: be surrounded by experts and technocrats and it wouldn't be
24:03
Speaker 5: the extreme. Well, I think now we have to accept that.
24:05
Speaker 5: You know, there's a Maloney scenario on the right and
24:07
Speaker 5: there's a Starmer scenario on the left. And the real
24:09
Speaker 5: fight over the next few days is to see what
24:12
Speaker 5: what will it take, How how aggressively will sparks fly
24:15
Speaker 5: to carve off the Republican left from Minoshal. That's the
24:19
Speaker 5: that's the fight.
24:20
Speaker 2: Do you see individual figures coming out of this, whether
24:23
Speaker 2: it's Gabriel Lettel or Lusman. Do you identify future leaders
24:29
Speaker 2: of some kind of coalition in the current spectrum?
24:32
Speaker 4: You mean the new prime ministry.
24:35
Speaker 2: Well in terms of but also in terms of being
24:38
Speaker 2: a potential rallying point for some kind of I mean
24:42
Speaker 2: the discussion that the phrase was parliamentary arc but I
24:45
Speaker 2: mean not just for the bargaining now, but also as
24:48
Speaker 2: a potential candidate in four years time. I mean that's
24:52
Speaker 2: also something we're looking for.
24:54
Speaker 4: Are we not pronounced on the countdates? Three years time
24:57
Speaker 4: or two years and a half, would not embark on
25:01
Speaker 4: any kind of I would say speculation on the way
25:05
Speaker 4: it will proceed, but at a time after sufficient maturing
25:08
Speaker 4: and then the primary. The President of the Republic has
25:11
Speaker 4: a role to play because they will consult all political
25:14
Speaker 4: parties without exception, and it would also create the sentiment
25:19
Speaker 4: that things are more fluid than we might have thought.
25:23
Speaker 4: But all that being said, it seems to me that
25:27
Speaker 4: clearly there should be some kind of discussion for I
25:32
Speaker 4: would say, some kind of id majority or coalition that
25:37
Speaker 4: would last for a certain period of time between again
25:41
Speaker 4: what I call the Republican left, the Republican right, and
25:46
Speaker 4: the center, and you identify very clearly who would be
25:50
Speaker 4: the negotiating parties there. I agree that it's clear that
25:58
Speaker 4: a new program has to be set up. This new program,
26:02
Speaker 4: in my hope, would not comprehend any kind of net
26:06
Speaker 4: additional spending, because I share entirely of views that you
26:10
Speaker 4: expressed on the fact that there is no room for manualing,
26:13
Speaker 4: absolutely no room for manuring, not only in terms of
26:16
Speaker 4: I would say europe and European roles, but also no
26:20
Speaker 4: room for manuring in terms of preserving as much as
26:24
Speaker 4: possible the credit worthiness of the signature, and that is
26:27
Speaker 4: extremely important. That being said, of course, you have measures
26:32
Speaker 4: that can be taken without having a cost, and that
26:36
Speaker 4: might permit the I would say left on the one
26:40
Speaker 4: hand and the center right on the other hand, to
26:44
Speaker 4: be reasonably satisfied in the circumstances. So it is my hope,
26:49
Speaker 4: but it is also my expectations, because I don't see
26:52
Speaker 4: anything else to permit the country to proceed.
27:00
Speaker 2: That's a good spot to leave it for some questions
27:04
Speaker 2: from the audience or indeed any of the Bloomberg people here, Yes,
27:08
Speaker 2: in the back there.
27:10
Speaker 3: Hell, you mentioned a couple of times measures that now
27:14
Speaker 3: course that could please their left wing Republican parties. Could
27:18
Speaker 3: you name a couple of them that you may expect?
27:22
Speaker 4: No, No, I'm not rapping the new program. I'm sorry. Well,
27:27
Speaker 4: but my neighbors can do.
27:29
Speaker 2: That, eleanor can think of anything.
27:31
Speaker 1: It's a bit difficult to thing of them maybe not doing,
27:35
Speaker 1: for example, the unemployment reform, the unemployment benefits reform. It's
27:38
Speaker 1: in a way not adding benefits.
27:41
Speaker 2: What is it just those who does follow all of
27:43
Speaker 2: the reforms, which what would that be? What is that?
27:46
Speaker 1: So the current government has agreed to do any unemployment
27:51
Speaker 1: benefits reform that would start in July right now, and
27:55
Speaker 1: that will decrease the duration of the unemployment benefits and
27:58
Speaker 1: also tighten the rules for being eligible for unemployment benefits.
28:02
Speaker 1: And the estimate of the government was that these will
28:04
Speaker 1: add three point six billions of savings annually, So not
28:10
Speaker 1: doing that would keep the would have no impact because
28:15
Speaker 1: currently it's not accounted in our in the baseline, so
28:18
Speaker 1: the MF baseline or our baseline, but will keep the
28:22
Speaker 1: left happy.
28:23
Speaker 2: Jacqueline Simmons, he runs our European coverage.
28:26
Speaker 6: There have been steps forward with respect to incentivizing the
28:31
Speaker 6: finance and business community, which I think is reflected in
28:34
Speaker 6: this room today just in the way of you know
28:37
Speaker 6: again incentives and also centering Paris as a sort of
28:41
Speaker 6: financial hub post brexit. And I just wondered when any
28:45
Speaker 6: of you thought about what kind of paralyzing impact this
28:50
Speaker 6: might have, or last night's results might have on this community.
28:55
Speaker 1: Well, in my view, the first question is what will
28:58
Speaker 1: be the labor costs in the future, What will be
29:00
Speaker 1: the spending in terms of labor cost well, then going
29:02
Speaker 1: to increase or not if we embark into more left
29:05
Speaker 1: wing policies that's likely to happen. Also, what will happen
29:09
Speaker 1: with the labor force supply in general, what will happen
29:13
Speaker 1: with the rest of the reforms on the the incentivize
29:16
Speaker 1: people to get back into the into the workforce. But
29:19
Speaker 1: also there is a there is a question of how
29:22
Speaker 1: the markets will react to this uncertainty. And for example,
29:26
Speaker 1: with lingering potay of fiscal slippage and this political uncertainty,
29:30
Speaker 1: we expect that markets may spreads might stay wide as
29:36
Speaker 1: the current at the current levels for a bit longer
29:38
Speaker 1: until things settle down or in the case that there
29:41
Speaker 1: is any more likely to spend more left wing spending,
29:47
Speaker 1: then spreads even my White's further by for example fifty
29:50
Speaker 1: basis points compared to the current levels. That creates uncertainty
29:54
Speaker 1: and will make markets to look to be careful in
29:58
Speaker 1: the coming days in the weeks.
30:01
Speaker 2: Jactor, where do you think people who are moving to
30:04
Speaker 2: France who stayed here?
30:06
Speaker 4: I would say, first of all, let's take also into
30:09
Speaker 4: account the fact that the worst has been avoided in
30:13
Speaker 4: terms of frightening newcomers and or investors savers of France,
30:22
Speaker 4: Europe and the entire world. So that's something which we
30:25
Speaker 4: should not forget. Second, I would say that all will
30:29
Speaker 4: depend precisely on this maturing process. I was mentioning which
30:34
Speaker 4: is a multi party and I would say multi citizens
30:38
Speaker 4: naturing process. So we will see again. I am reasonably optimistic,
30:45
Speaker 4: as you could see. But of course, when you take
30:49
Speaker 4: a decision, you want to take your decision on the
30:51
Speaker 4: basis of facts, and we will see how things are
30:56
Speaker 4: moving from now on. Again, it seems to me that
31:01
Speaker 4: there is some kind of common sense solutions that would
31:07
Speaker 4: normally please all parties concerned and be the best for
31:11
Speaker 4: our fellow citizens. But because after all, a democracy must
31:15
Speaker 4: give the maximum amount of satisfaction to the fedow citizens.
31:19
Speaker 2: But it is.
31:19
Speaker 4: Absolutely clear that programs that are not visible in any
31:24
Speaker 4: case are doing a lot of harm to the Fedow citizen.
31:28
Speaker 4: I was myself experiencing that because when we had the
31:32
Speaker 4: crisis in Europe, have to say that those that have
31:37
Speaker 4: been spenders and spenders and spenders had to tell their
31:40
Speaker 4: fellow citizens we are very sorry, but now you have
31:43
Speaker 4: to tighten your belt your belts, and that is very
31:47
Speaker 4: very difficult, it is terrible. So again, being really reasonable
31:53
Speaker 4: is something which is very important for our fellow citizens.
31:56
Speaker 4: And they expect again that this very complex s meduling
32:00
Speaker 4: process we'll proceed from no One.
32:03
Speaker 5: Yeah, no, I guess it will obviously not come as
32:06
Speaker 5: easily to a left government than it did to mac
32:10
Speaker 5: Horn to do things like the Choose France summit, and
32:12
Speaker 5: even to talk about the Capital Markets Union. I think,
32:15
Speaker 5: you know, that does not seem to be part of
32:17
Speaker 5: the part of the current speech. If we think of
32:20
Speaker 5: the kind of extreme case, it's in the nineteen eighties
32:23
Speaker 5: when Mitihont came to power, there were nationalizations and its appropriations.
32:27
Speaker 5: Obviously we're not talking about that. And I guess we
32:31
Speaker 5: could also think, well where, you know, if it is
32:33
Speaker 5: just a question of changing city every few years, where
32:36
Speaker 5: do people go. I mean, this is a global phenomenon,
32:39
Speaker 5: a European phenomenon. It's interesting to me that in Italy
32:43
Speaker 5: you still have all of these tax breaks to attract
32:46
Speaker 5: foreign investors in hedge fund managers, even with a right
32:49
Speaker 5: wing populist coalition. So and also I think even the
32:54
Speaker 5: Left Bloc talked about being open to defense fiscal integration
32:58
Speaker 5: at the European level, but with defense as the hook.
33:01
Speaker 5: So there are some I think avenues to kind of
33:04
Speaker 5: incite investment, but I think it will obviously not be
33:07
Speaker 5: with the same supply side focus as McCaul has been
33:11
Speaker 5: so far.
33:11
Speaker 2: If you pull back the lens from a from a
33:13
Speaker 2: global investing standpoint, and indeed a geopolitical standpoint. No. Bloomberg
33:19
Speaker 2: Economics has done important research showing how Europe as a
33:24
Speaker 2: group has fallen behind the US and its economic potential
33:27
Speaker 2: over the last ten years as a twenty nearly twenty
33:29
Speaker 2: percent gap that's open up on course to be a
33:32
Speaker 2: forty percent gap in the future if there's no improvement
33:35
Speaker 2: in the underlying fundamentals, the kind of things that you
33:38
Speaker 2: would need to do to untap the kind of investment needed,
33:44
Speaker 2: because it seems it's investment that's the gap is capital
33:48
Speaker 2: markets union is potentially joint debt issuance to underpin investments
33:54
Speaker 2: in green technologies, all of these things that we talk about,
33:58
Speaker 2: the digitalization of the economy, encouraging more high tech successes.
34:04
Speaker 2: In confronting a US government which under whatever president, is
34:08
Speaker 2: going to be pushing money into industrial policy and forging
34:12
Speaker 2: a very different, perhaps more interventionist, more mercantilist economic policy.
34:18
Speaker 2: Before this election, we would have said that the big
34:22
Speaker 2: question mark around whether Europe could possibly do that is
34:25
Speaker 2: the Franco German weakness, is the weakness of that relationship,
34:28
Speaker 2: but also the fact of the two of the two
34:30
Speaker 2: leaders present, Macon and Olaf Schultz, both both being extremely weak.
34:36
Speaker 2: I mean that doesn't change, Jean Claud. I mean, if
34:39
Speaker 2: you are looking to Europe to have to actually step
34:41
Speaker 2: up and do things over the next few years in
34:44
Speaker 2: response to China and the US, that seems less likely,
34:50
Speaker 2: even less likely now than a week ago, or just
34:52
Speaker 2: as unlikely.
34:53
Speaker 4: It doesn't seem to be unlikely at all, to be Frank,
34:56
Speaker 4: because there is a recognition, there is a joint diagnosis
35:00
Speaker 4: on the fact that we cannot stay as we are
35:03
Speaker 4: with the US on the one hand and China on
35:06
Speaker 4: the other hand, on a number of very very important
35:09
Speaker 4: issues like high tech, like the platforms, the digital digitalization
35:15
Speaker 4: of our continent, and so forth and so forth. So
35:18
Speaker 4: I think that this is the underlying diagnosis which is present,
35:23
Speaker 4: which is recognized more or less by the various countries
35:27
Speaker 4: concern whether or not with this result of this election,
35:32
Speaker 4: the cooperation between Germany, France and all others will be
35:36
Speaker 4: oversimplified or over complicated. We will see you again I'm
35:39
Speaker 4: not necessarily pessimistic, but the fact is that it was
35:44
Speaker 4: not working very well. But we just addressed the question
35:47
Speaker 4: of eighty one and the program of eighty one. I
35:49
Speaker 4: only want to remind all of us when the Left
35:53
Speaker 4: came in power in eighty one, we had overall outstanding
35:59
Speaker 4: debt as a proportion of GDP of twenty percent of
36:02
Speaker 4: the GDP. We are at tw one hundred and eleven
36:05
Speaker 4: percent of GDP. We had a deficit of minus zero
36:09
Speaker 4: point one percent of the GDP. We had minus five
36:14
Speaker 4: point five or something. So we are in a very
36:18
Speaker 4: difficult different situation and we have to take account, of course,
36:22
Speaker 4: of that. It seems to be very important now on
36:24
Speaker 4: what you said on the US versus Europe. You are
36:28
Speaker 4: right in terms of absolute GDP and absolute GDP per capita.
36:33
Speaker 4: But part of the difference between the US and US
36:36
Speaker 4: is that the European, for their own I would say sake,
36:41
Speaker 4: prefer not to work too much. And this is true
36:46
Speaker 4: in all European countries. I was surprimed myself to read
36:49
Speaker 4: check with Germany, and in Germany you have a lot
36:52
Speaker 4: of part time jobs. That makes all taken into account,
36:56
Speaker 4: the number of our work quite miserable in comparison with
36:59
Speaker 4: the US and the same or less and certainly the
37:02
Speaker 4: same in the UK too. I mean, we we are
37:04
Speaker 4: living in a different universal disrespect and of course it
37:07
Speaker 4: makes an enormous difference. But when I look at the
37:09
Speaker 4: best countries in Europe and the productivity our works, the
37:15
Speaker 4: difference is not that big. And also we have to
37:19
Speaker 4: take into account, of course that a lot of European
37:21
Speaker 4: countries are catching up even on the best European not
37:27
Speaker 4: necessarily on the best European states, So all American states
37:32
Speaker 4: all taken into account. I think that we should not
37:36
Speaker 4: overdo the difference between the US and Europe, even if
37:40
Speaker 4: they are absolutely clear. I would say elements and sectors
37:45
Speaker 4: where we are absolutely miserable and we have to work
37:49
Speaker 4: on not being that miserable in the London all right.
37:53
Speaker 2: Well, a final question from Alan Katzachi.
37:57
Speaker 7: You mentioned Jeanie, You mentioned that lady, and I'd like
38:00
Speaker 7: to go back a little bit further. You also talked
38:03
Speaker 7: about how the president will have to meet with every
38:05
Speaker 7: single political party. There has to be a maturing process.
38:08
Speaker 7: Everything you say reminds me of what the French rejected,
38:12
Speaker 7: which was the Fourth Republic before Charles de gaup put
38:15
Speaker 7: in the Fifth Republic. You know, we had this constant
38:18
Speaker 7: negotiation with various parties in Parliament. It was an unstable situation.
38:22
Speaker 7: In what way is it the same now as it
38:25
Speaker 7: was pre nineteen fifty eight and in what ways is
38:27
Speaker 7: it different.
38:30
Speaker 4: First of all, the President of the Republic has powers
38:34
Speaker 4: that the President of the Fourth Republic had not, so
38:38
Speaker 4: that is very clear. In particular in appointing the Prime Minister,
38:42
Speaker 4: it's a decision of the President of the Republic himself
38:45
Speaker 4: according to the Constitution. We also have to recognize that
38:51
Speaker 4: the Fourth Republic didn't do such a bad job, all
38:56
Speaker 4: taken into account, of course, the main problem of the
38:58
Speaker 4: Fourth Republic it was in impossible for them to i
39:03
Speaker 4: would say, face up with the Algerian War, and the
39:08
Speaker 4: Fifth Republic came out of this absolutely capacity of the
39:11
Speaker 4: Fourth Republic to face up with that war. But all
39:14
Speaker 4: taken into account in the economic and functionial sphere, and
39:19
Speaker 4: even in the defense sphere, because the nuclear deterrent of
39:22
Speaker 4: France started under the Fourth Republic. So all taken in
39:27
Speaker 4: all the res taken into account, it was not that
39:30
Speaker 4: such a poor political system. So if we are we
39:37
Speaker 4: won't be closer to the Fourth Republic in my opinion,
39:39
Speaker 4: because of the institutions of the Fifth Republic, but we
39:43
Speaker 4: would be closer perhaps to other European As a matter
39:47
Speaker 4: of fact, there's not a single European country which had
39:51
Speaker 4: the equivalent of the Fifth Republic, and they all have
39:55
Speaker 4: those negotiations to have a coalition with various political sense
40:00
Speaker 4: stivities after the election, and we are more or less
40:03
Speaker 4: pushed in this direction, which again I would not consider absurd,
40:09
Speaker 4: and the reference to the Fourth Republic doesn't seem to
40:12
Speaker 4: be sufficient to say no, no, let's not do that.
40:15
Speaker 4: Comparison with the other countries in Europe is something which
40:19
Speaker 4: is quite an argument or embarking on such discussions.
40:24
Speaker 2: As you know, the way people see these things is
40:27
Speaker 2: two data points. Is a trend. We have a Keir
40:30
Speaker 2: Starmer labor government in the UK. We have the left
40:34
Speaker 2: out performing all expectation here in France. Is there a
40:39
Speaker 2: possibility that this is the beginning of the end for
40:42
Speaker 2: the rise of the populist right that we hear about
40:45
Speaker 2: or is it actually just been a dress rehearsal for
40:47
Speaker 2: next time when they'll manage it.
40:51
Speaker 4: I said never said never in politics, So no, I
40:55
Speaker 4: would say it is a clear sign that at a
41:01
Speaker 4: certain moment there is a popular reaction because clearly we
41:07
Speaker 4: are living in a democracy. The votes are secret, the
41:15
Speaker 4: bulletin are put in the envelope by each individual, each
41:20
Speaker 4: I would say, fellow citizens totally independently, and nobody knows
41:24
Speaker 4: and can know what he's doing. So it seems to
41:27
Speaker 4: me that the sign that has been given by the
41:29
Speaker 4: French people, the French citizenship, is very, very important. But
41:34
Speaker 4: I will not draw definitive conclusion on the fact that
41:37
Speaker 4: now there is aggressive with rowal of public take into
41:42
Speaker 4: account as that in the left constituency there are also
41:49
Speaker 4: populist elements in the left. They are also part of
41:54
Speaker 4: the political spectrum.
41:56
Speaker 5: You know, well, no, I don't Populism is not going
42:02
Speaker 5: to be defeated this this They are not part of
42:05
Speaker 5: the furniture.
42:05
Speaker 2: That's just a fact.
42:07
Speaker 5: The US, the UK, I mean, Trump may come back
42:10
Speaker 5: later this year, and in the UK Nigel Farage is
42:13
Speaker 5: even has an even bigger pulpit than ever. So I
42:16
Speaker 5: think we shouldn't get too attached to the idea that
42:18
Speaker 5: nothing should change or shouldn't change too much in purchasing power,
42:23
Speaker 5: inflation and immigration were the two top concerns for voters
42:27
Speaker 5: in this election. And if we don't even try and
42:30
Speaker 5: offer some kind of dream to people who have seen
42:33
Speaker 5: real wages squeezed, to feel their living standards of declined,
42:37
Speaker 5: and where the divide between rural and urban France is
42:40
Speaker 5: still as deep as ever, then we are going to
42:42
Speaker 5: get the pen again in a year.
42:44
Speaker 3: Or two years or three years.
42:45
Speaker 5: So let's let's let's not forget that.
42:48
Speaker 2: Okay, we have a message of I think we've cut
42:50
Speaker 2: through some some fog, we have some optimism, but also
42:54
Speaker 2: taking some important lessons from this from this result, and
42:57
Speaker 2: of course we've still got plenty of plenty to watch
43:00
Speaker 2: the next few weeks because we don't know what's going
43:01
Speaker 2: to happen. But thank you for all being here for
43:04
Speaker 2: our recording of voter Nomics from our Paris bureau, and
43:07
Speaker 2: thank you to our excellent guests Leonell Laurent, Eleonora mabro
43:11
Speaker 2: Edi and of course Jean Claude Triche. Subscribe to voter
43:16
Speaker 2: Nomics wherever you listen to podcasts, everyone in this room,
43:19
Speaker 2: I shall expect to do that, and if there was
43:21
Speaker 2: anything you didn't quite catch, you will also be able
43:23
Speaker 2: to hear it on the Voto Nomics podcast feed, but
43:26
Speaker 2: from Paris. Thank you very much.