Macron pushes on with with business-friendly moves as popularity dips

Paris

AS French President Emmanuel Macron presses ahead with the most business-friendly overhaul of the nation's labour market in decades, his popularity with many of his countrymen has gone into a tailspin.

Consumer confidence is falling. A nascent recovery is cooling off. Unemployment has been stuck above 9 per cent for months. And then there was the encounter with the gardener.

In an exchange that went viral on social media, Mr Macron was seen as lecturing an out-of-work gardener in Paris to look harder for a job. "If I crossed the street, I'd find you one," he told the man, prompting a Twitter storm of insults aimed at Mr Macron, a former investment banker.

That is hardly the vision of France, or of his presidency, that Mr Macron hoped for when he swept into office 18 months ago with a pledge to revitalise Europe's third-biggest economy by pursuing workforce reforms that had been stalled for more than a decade.

His approval ratings have slumped, and on Wednesday his interior minister resigned - the third Cabinet member to quit in six weeks.

Amid the turmoil, the government is trying to shore up support by giving cash back to the working class - with tax breaks next year worth six billion euros (S$9.5 billion) for middle- and low-income earners - while reassuring investors that his designs for a "new French prosperity" are on track.

Mr Macron remains unbending in his attitude - and his criticism that French society must adapt to thrive.

"I will not change course," he told the French newspaper Journal du Dimanche. "We're in a moment when many political leaders before me have yielded. But it's more necessary than ever to move ahead with reforms."

His remarks dovetailed with a public relations blitz by some members of his Cabinet in recent days, and underscored the stakes for Mr Macron as he unwinds business regulations and changes the parameters of the welfare state.

Mr Macron has insisted that painful economic measures must come first, including a revamping of France's strict labour code and budget cuts to keep the government's deficit within European rules, to seed dynamism.

Bruno Le Maire, the finance minister, said that abandoning pro-business policies would lead to a "dead end".

The 2019 budget also includes an 18.8 billion euro reduction in payroll and other business taxes to encourage hiring and investment.

"But French people are sceptical," Mr Le Maire told reporters last week. "We need to explain that this new model will be successful, and that it takes time before seeing the full benefits."

If convincing French voters is an uphill battle, it is especially challenging for Mr Macron, who is viewed internationally as a dynamic European leader. His policies at home have yet to help most households.

In his first year, he delivered tax breaks to corporations and to France's wealthiest 10 per cent, earning him a reputation for favoring the rich.

Purchasing power fell for the bottom 5 per cent of households, while the majority in the middle, about 70 per cent, were largely unaffected, according to the French Economic Observatory, an independent think-tank.

Changes to the labour code intended to stoke hiring have trimmed unemployment slowly. Joblessness has fallen to 9.3 per cent, from 10.1 per cent when Mr Macron was elected, but is still more than double the German unemployment rate.

Although a nascent recovery before he took office helped generate jobs, growth has cooled recently to a 1.7 per cent annual pace, as it has in the rest of the eurozone.

Mr Macron promised voters that he could whittle unemployment to 7 per cent by the next presidential election in 2022.

To meet that target, the economy would have to grow by at least 1.7 per cent in each of the next four years, which is by no means certain, according to the French Economic Observatory.

Mr Macron's economic policies have encouraged companies such as Facebook and Fujitsu to increase investments in France.

But his style - the confrontation with the gardener is a case in point - has alienated him from working-class voters and older citizens, who view him as out of touch and inclined to favour big business at the expense of workers.

His 2019 budget tries to make some amends. It pivots towards those left behind in the previous round of tax cuts, targeting six billion euros in housing and payroll tax cuts at the working class, on top of reductions in employee health care contributions and unemployment insurance payments.

A separate plan would set aside eight billion euros to tackle rising poverty with aid and job-training programmes for disadvantaged youths under 25.

The budget is aimed at "making work pay" by leaving more money in workers' pockets. But to keep the deficit in check, Mr Macron is also trimming benefits for those not working, and cutting over 40,000 jobs in the public sector.

Increases in pensions and family benefits would be capped at 0.3 per cent a year, well below the 1.8 per cent annual average inflation rate.

Although 300,000 pensioners who make less than 1,200 euros a month will be exempted, many older voters are angry about those cuts and are taking to the streets in protest.

There are 15 million pensioners in France, and three-quarters of them voted for Mr Macron in the second round of balloting.

The government will also tighten unemployment insurance eligibility and reshape professional training programmes to push the jobless into work more quickly.

Despite high unemployment, nearly 330,000 jobs are unfilled as employers scramble to find programmers, drivers and other skilled workers.

To spur job creation, a new policy aims to increase the number of medium-sized businesses in France, which have struggled to grow at the same rate as in neighbouring countries.

These include cutting corporate social security taxes, and reducing requirements for companies to have union representatives.

Yet even the business community has been grousing about Mr Macron's changes. Some companies are upset about the government's plans to limit the use of short-term contracts, arguing that the policy ignores the needs of the modern workplace.

Employers relied on short-term contracts during the financial crisis. The sort of innovative industry that France now seeks - whether digital or manufacturing-based - needs agile and fluid workers, business groups contend.

Mr Macron took pains on a tour of the French Antilles last weekend to appear more down to earth, glad-handing the public and standing in the rain for selfies with smiling crowds. "I'm not perfect. There are things that need to be corrected," he told the French newspaper Le Monde.

He also remains adamant that his approach will benefit younger voters - including the 25-year-old gardener who couldn't find work. Mr Macron listened to his complaint that horticulture jobs were hard to find and gave a rapid-fire response: Be flexible.

"If you're willing and motivated, in hotels, cafes and restaurants, construction, there's not a single place I go where they don't say they're looking for people. Not one - it's true!" Mr Macron told the man.

As it turns out, the man found work as a bus driver, which Mr Macron's supporters said showed that jobs were available.

The French president is "taking a gamble", said Éric Heyer, director of analysis and forecasting at the French Economic Observatory.

"By easing taxes on the middle class, he's trying to get away from this image that he's 'president of the rich'. The measures will either deepen inequality or help growth," Mr Heyer added. "But nothing is guaranteed to be a success, so it is unclear if he will win or lose the bet." NYTIMES