MACRON SIGNALS FAILURE OF KEY EURO POLICY




Robert Harneis –TDO- (FRANCE) According to information leaked to Reuters, President Emmanuel Macron is backing away from radical Euro reform. It is a serious policy defeat with major political consequences. During the election campaign Macron proposed to reform the euro and make it viable by introducing a joint finance minister, budget and a Eurozone parliament. He mocked Marine Le Pen in the presidential debate for her uncertainty on the issue and for wishing to abandon the euro.

Both candidates agreed that the present situation of one currency but different economic governance could not be viable for much longer and they are supported in that view by many economists. Macron even said before the elections that ‘if the euro is not radically reformed it will not exist in 10 year’s time’. Macron proposed united economic governance and Le Pen proposed a return to the French franc. Since her defeat Le Pen has said that whilst leaving the euro was important it was no longer top priority. What she meant was that she still believes that it is the right policy but that it was not acceptable to the electorate.

Now French officials have told Reuters that Macron ‘does not want to get bogged down in a technical debate over euro zone reform at a time when the EU can deliver on other fronts that may resonate more with the public.’ In this he is imitating the tactic of Marine Le Pen. For this she has been pilloried in the media. Macron can expect the same treatment once his policy change becomes clear, especially from the newly elected leader of the main opposition Republican Party, Laurent Wauquiez.

Since his election critics of the president’s proposals for the euro have maintained that his policy was economically correct but impossible to put into execution. It has been calculated that a united Eurozone government would require Germany to contribute 8% of its GDP a year to support southern Eurozone governments and that this was politically impossible. It seems that Macron now agrees with them.

‘The euro zone is just one piece of the puzzle and I don’t necessarily think it’s the best one to start with,’ one senior official said. ‘It is not our goal to have a technocratic discussion about the budget and how it would work.’ In a similar vein Sylvie Goulard a strong Macron supporter and one of his former ministers is quoted as saying ‘Focusing on the technical details of European reform is the wrong approach. You really need to focus on the bigger picture - the challenge from U.S President Donald Trump and from China,’

Again, according to Reuters, ‘French officials stress that Macron has not discarded his ideas for the euro zone. But the decision to shift them down the priority list is a recognition of the political realities in Europe.’

Unfortunately for the French government and people reform of the euro is not just ‘one piece of the puzzle’ but a key element of Macron’s policies. It is ‘the bigger picture’. All the financial and labor reforms that have been pushed through the French Parliament by the new government have been aimed at achieving agreement with Germany to get Euro reform. If this agreement was ever possible, which is doubtful, it is now completely impossible given the political crisis in Germany. Other governments besides Germany have voiced opposition to his proposals, notably the Dutch. Prior to their last elections the Dutch government defused the issue of Euro reform by announcing an commission of enquiry to investigate all aspects of Eurozone membership including leaving it. Significantly the vote in the Dutch parliament setting up the enquiry was voted through unanimously.

It would be surprising if these leaks to Reuters were without foundation. They are presumably intended by the government to mask the change of policy by the French President at the meeting of heads of state to discuss Euro reform to be held on Friday 17th December.

To date France’s young president has led a charmed political life. The election of a dynamic new young leader for the opposition Republican Party combined with this policy retreat indicates that his problems are about to begin.