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posted on 11 May 2017

France: The Economic Challenges Facing Macron

by Elliott Morss, Morss Global Finance


Many in Europe breathed a sigh of relief when Macron was elected. But the economic problems he faces in France and the Eurozone are formidable. These issues are explored below.

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France's Economic Problems

The economic problems of France are summarized in Table 1. Economic growth has been sluggish since the 2008 US bank collapse. The result has been continuing high unemployment (now more than twice as high as in the US). The Keynesian remedy for high unemployment is deficit finance. But the French deficit is already high at 3% of GDP. And government debt as a percent of GDP is high by international standards as well.

Table 1. - France: Key Economic Indicators

Source: FocusEconomics

France and Germany are working together to keep the European Community and the Eurozone from breaking apart. But the French figures are troubling to the "austerity hawks" in the Community - Austria, Germany and The Netherlands. And it is far from clear just how Macron will turn these numbers around.

Eurozone Problems

France, along with other Eurozone countries, has been dragged down by problems in the currency union. First was the Greek crisis, followed by economic problems in Spain and Portugal. There is a major divide between countries in the Eurozone having economic problems and countries believing austerity solves all problems. I have earlier argued that a single currency union for countries as different as Greece and Germany will not work. In Table 2, I provide economic data on countries facing severe economic challenges (I call them the "Weak Sisters") and the "austerity hawks." The data in red are indicative of a problem.

Table 2. - Economic Problems of Other Eurozone Countries

Source: FocusEconomics

Macron addressed a number of the Eurozone's problems as Hollande's Economy Minister.

  1. In July 2015, he sided with the IMF, arguing that any Greek bailout package should include debt reductions. This is anathema to Germany. He argued that the Greek and European leaders co-produced the Greek government-debt crisis and that the agreement reached in summer 2015 between Greece and its creditors will not help Greece.

  2. In June 2016, he criticized the austerity policies imposed on Greece by other Eurozone countries. He argued that they are unsustainable and called for the joint establishment of "fiscal and financial solidarity mechanisms" and a mechanism for restructuring the debt of Eurozone member states.

  3. In April 2017, Macron called for a "rebalancing" of Germany's trade surplus, saying that "Germany benefits from the imbalances within the Eurozone and achieves very high trade surpluses."

While it is quite clear that the Greek debt is too high to be sustainable, it is not at all clear what he means by items 2 and 3.


Going forward, Macron faces numerous economic challenges. And from what he has said, it is not at all clear what he will do to resolve them. In addition, it is hard to see how he will be able to put together a majority in the French Parliament after the elections in June. And with Brexit negotiations just getting underway, it would appear European uncertainties will continue for some time to come.

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