France: Macron wins majority, but crucial reforms still ahead – HSBC

Olivier Vigna, Economist at HSBC, suggests that President Macron’s party and its allies have won an absolute majority in the French National Assembly but Macron’s parliamentary success is no guarantee of reforms. 

Key Quotes

“The National Assembly is the most powerful House of the French Parliament, which also includes the Senate. Only the former has the Constitutional right to censure the cabinet, forcing a cabinet reshuffle and a new Prime Minister to be appointed. The Lower House also trumps the Senate in cases of conflict over a draft law. So even though Macron’s party currently has no representatives in the Senate, the President’s majority in the National Assembly may be large enough, in our view, for some Senate MPs to consider backing some government policies in the future. That said, political backing does not necessarily mean successful reforms.”

“The labour market is expected to be a high priority for reform 

With no obstacles expected from the parliament, Mr Macron has a better chance of implementing change. PM Édouard Philippe recently set out the broad outline of some reforms to be conducted over the next 18 months, essentially aimed at boosting job creation, with an official goal for the unemployment rate to fall to 7% by 2022. More details of these reforms will be released over the next few weeks, after meetings with unions.

French authorities have also expressed concerns regarding the likelihood of the 2017 fiscal deficit target being met. Achieving a deficit of 2.8% of GDP looks ambitious to us but could be a crucial milestone for France’s credibility in Europe. Undoubtedly, Macron’s cabinet understands the urgency for reform. But implementation may still prove difficult.”