WHEN François Hollande dumped his prime minister in March 2014, it marked a U-turn for the Socialist president. Out went the politics of envy and punitive taxes. In came talk of lower public spending and encouraging business. Under Manuel Valls, the new prime minister and a voice of Blairite moderation, the language has changed, to the relief of those exasperated by the unreconstructed French left. But sceptics have been waiting to see if fine words would be matched with deeds.
On the public finances, the government has shifted its deficit reduction in 2014 from tax rises, which were throttling investment and growth, to curbing spending. It has promised no further tax increases in 2015. Even Mr Hollande’s infamous 75% top tax rate, a much-hyped campaign promise, is disappearing. The upshot will not be enough fiscal consolidation for France to obey the euro-zone rules in 2015; it has unilaterally pushed back to 2017 its promise to bring the deficit down to 3% of GDP. But at least the direction is now right.
Mr Macron’s bill is the Socialist government’s flagship effort to rid the economy of rigidities that limit growth. Ever since Charles de Gaulle commissioned a report published in 1959 on how to “remove the obstacles to economic expansion”, successive governments of left and right have ordered studies that recommend deregulation, including of professions such as pharmacies and notaries, only to ignore them. Since the notary profession was codified under Napoleon, the rules have changed only once—in 1945. So it is to Mr Macron’s credit that he is trying at all.
Some parts of his bill will have direct, quantifiable results. Under existing rules protecting the railways, for instance, private coach lines can transport only a limited quota of intercity passengers, and only on routes that link France with other countries. There are no dedicated intercity coaches. So to travel from Périgueux to Clermont-Ferrand, say, passengers must make a five-hour, two-train journey for what is a direct road trip of three hours. The government reckons this reform alone could create 10,000 new jobs.
Another plus is Mr Macron’s plans for Sunday trading. He wants shops to open one Sunday a month, up from five a year, and every Sunday and evening in “international tourist zones” and railway stations. The idea is to discourage tourists from leaving Paris on Sundays to spend their money in London. Overall, the Macron bill has been welcomed by Medef, the employers’ body, as a “real step in the right direction”.
The trouble is that what pass as useful, if meagre, changes by international standards are seen as downright provocative by Mr Macron’s party. “Has the left now got nothing else to suggest for the organisation of our lives than a Sunday walk in a shopping centre and the accumulation of retail goods?” asked Martine Aubry, the left-wing mayor of Lille, in Le Monde. For some Socialists, rest on Sundays is a historic achievement of the labour movement; any attempt to revoke this right is an assault on the very concept of progress.
When the bill goes to parliament in January 2015, it will face resistance not only from the right, which opposes more competition for notaries, but from the government’s disgruntled parliamentary majority. Some bits are likely to be diluted. As it is, thanks to internal disputes, Mr Macron had to relinquish to the health minister all things paramedical. Pharmacies, for instance, will keep their monopoly on non-prescription drugs such as paracetamol.
As for labour-market reform, it has largely been dropped altogether. There is nothing about the 35-hour working week, despite Mr Macron’s repeated criticism of it. Nor, despite his original plans, is there any effort to ease “threshold effects”: works-council and other rules that kick in when a firm’s headcount increases beyond a certain level (usually 49), discouraging any additional hiring.
The government insists that it is ready to legislate next year to make it easier for firms to negotiate changes in working time and pay in return for protecting jobs. This can now be done only if a firm faces “serious economic difficulties”. As one minister puts it, “there are so many constraints that few agreements have been made.” Yet 2015 is also a local-election year. If anything, caution will temper reformist ambitions.
A recent Franco-German report, co-written by Jean Pisani-Ferry, head of the government’s economic-strategy unit, and Henrik Enderlein, a German economist, concludes of France: “We fear a lack of boldness for decisive reforms.” Today’s difficulties stem from yesterday’s mistakes. Mr Hollande wasted his first two years, never securing a mandate for what he has to do. Mr Valls was not elected directly, and Mr Macron, for all his energy, never has been. More than anything, the Macron bill shows the limits to what can be done, even with the best reformist will, if political space has not been created first.