In France’s upcoming parliamentary elections, the country faces threats to its EU membership from political extremists on both the left and right.
Earlier this month, French President Emmanuel Macron called early parliamentary elections, plunging the EU’s second-largest economy into political uncertainty. Depending on the outcome, the uncertainty could extend to France’s EU membership itself, according to a research note from financial services giant Macquarie.
Macron, of the moderate Renaissance party, is being challenged by both the far-right wing of Marine Le Pen’s National Rally party and the far-left coalition of left-wing parties calling themselves the Popular Front, whose economic policies are criticized as fiscally irresponsible and risk violating EU guidelines that regulate spending in member states.
“Indeed, far-left and far-right populist policies are a major departure from market principles and fiscal responsibility and would represent a radical departure from current economic policies that, if implemented, would undermine France’s relationship with the EU,” Macquarie global strategists wrote in a research note on Monday.
EU turns a blind eye to France’s spiraling debt
The spending surge that would accompany these policies could lead to France being subject to what the EU calls excessive deficit programs. EU countries are subject to these programs if the European Commission, the EU’s executive arm, determines that a country is in breach of the Stability and Growth Pact, which requires the 27 EU member states to keep budget deficits below 3% of GDP and public debt-to-GDP ratios below 60%.
But the rules are not strictly enforced: Many EU member states are violating parts of the agreement, which was amended in February to accommodate countries with high levels of public debt, such as France.
In any case, the plans proposed by the left and right would significantly increase public spending without a clear path to raising government revenues. Doing so could put France in a bind and prevent it from filling a widening hole in the national budget. According to S&P Global, France’s debt level is projected to reach 109% of GDP in 2023, a figure that will rise steadily to 112% by 2027. France’s budget deficit was 5.5% last year, a few percentage points above the EU’s (non-mandated) threshold but lower than the U.S.’s, which is projected to be 6.7% this year.
The far-left “rejects Europe”
The Left has openly stated that it does not want to abide by the EU’s Stability and Growth Pact.
France’s Finance Minister Bruno Laer, a fellow moderate like Macron, explicitly criticized the left for not toeing the EU line, saying it would lead to “economic collapse.” Toeing the EU line would almost certainly force France into “Brexit,” Lamer said. “The left-wing coalition rejects the deal, therefore rejects European discipline, therefore rejects Europe,” he said.
In this election, the Popular Front explicitly denounced President Macron and called for a “complete break” with the incumbent president. The left has criticized Macron throughout his term, particularly his controversial pension reforms, which raised the retirement age from 62 to 64. According to Macquarie’s analysis, the Popular Front’s economic plan includes lowering the retirement age to 60, freezing the prices of basic goods such as fuel, food and energy, and raising the minimum wage. These plans would be funded by a capital gains tax and additional taxes on the wealthy, according to the Popular Front’s economic policy plan released on Friday.
Lamer blasted almost all of the spending increases in the Popular Front’s plan and its open refusal to abide by EU government spending guidelines, calling it “total confusion.”
“I am disappointed that left-wing parties are still able to propose policies that are out of touch with the realities of the world,” he added.
Lamer accused the far-left of not thinking through the full consequences of their policies: High levels of public debt caused by their spending proposals risk isolating France from the EU and could force austerity measures that would slow the economy and cause companies to lay off staff.
“Their plans are totally insane,” Le Maire said. “They would guarantee a downgrade, mass unemployment and an exit from the European Union.”
“Woven with lies” – almost the same as the far-right
Meanwhile, far-right politicians in France, like those in other European countries, have voiced eurosceptic positions, and McCauley said these demands from the French right would intensify if the EU were to impose an excessive deficit protocol on France.
During the election, Le Pen’s policies were criticized as being deliberately anti-European, designed to make EU membership seem unattractive to voters. “She wants to stay on the EU bus, but she is trying to push it off a cliff,” Mujtaba Rahman, Europe managing director at geopolitical consulting firm Eurasia Group, wrote in an op-ed for Politico.
All of this has drawn strong criticism from France’s Economy Minister, Bruno La Mer. “Especially when it comes to economic and financial issues, the far right is responsible for lies and the far left for stupidity and economic confusion,” he said last week.
The right-wing National Rally has not formally laid out its economic policies for the next election cycle, but the outlines of its policy proposals are well known. Under Le Pen, the party has supported several populist economic policies, including higher taxes on the wealthy and a proposal to raise the retirement age back to 62.
“When you look at the far right, you see an agenda woven with lies, so it’s not good,” La Mer said in an interview on French television.
Like the left, the Rally National wants to make basic necessities like food, gasoline and electricity more affordable. But rather than setting price caps, the right has proposed scrapping VAT on these items. Lamer said doing so would reduce government revenues by 24 billion euros, “exactly the same amount” it planned to save to balance the budget. But the moderate was relentless in his attack on Le Pen and the Rally National, accusing the left of promulgating policies that would cripple the French economy. “They don’t care about public money,” he said.
According to a Goldman Sachs analysis, if the far-right wins the parliamentary elections and succeeds in implementing a plan that includes a massive fiscal expansion, France’s debt burden would be even higher than currently projected. If the National Rally wins the next elections, France’s debt-to-GDP ratio would rise to 120% by 2027, 8 percentage points higher than projected otherwise.
Despite some similar effects on the French economy, there are some notable differences between the policies of the two hardliners. Unlike the Popular Front, many of the Rally National’s trade policies are much more protectionist, protecting French workers from competition from international corporations. Le Pen has also attracted new attention from France’s business community, which is predictably allergic to far-left politics, and whose left-wing tax policies have drawn them to Le Pen.
For centrist Macron supporters like La Mer, even that does little to appease two extremist groups that they believe, albeit acting by different means, are set to plunge France into economic crisis.
“I just want to say to my voters, to the centre-right and centre-left voters: there is still the possibility of resistance, there is still the possibility of remaining ambitious for France,” he said in an appeal to moderates.
