Loi Macron: Economic Reform with or without Parliament

France’s Macron Law recently aroused heated debate over the strength of the Hollande administration. Presented by the French economy minister Emmanuel Macron, the law aims to introduce a number of economic liberalizations in order to revive the French economy from its third consecutive year of near-zero growth. However, the law was attacked on both sides of parliament for either doing too much or not enough. In the end, Hollande forced its acceptance with a rarely used article of France’s Constitution.

While some of the reforms may appear inconsequential, economic liberalization of any sort provokes criticism from Hollande’s own Socialist Party. The Macron Law’s reforms include increasing the number of Sundays that French shops can be open from five to twelve a year and also allowing them to be open until midnight in the most popular tourist zones. Other articles seek to open up inter-city bus routes to privitisation and reform French labour courts. However, around thirty members of the government find themselves at odds with the bill, with Macron’s market-friendly approach in harsh contrast with the traditional leftist values represented by the Socialist Party.

Image courtesy of Parti Socialiste © 2012, some rights reserved.

Image courtesy of Parti Socialiste © 2012, some rights reserved.

Furthermore, Mr. Macron’s past as a Rothschild investment banker and the fact that he is an unelected member of the government, appointed by Mr. Hollande during the 2014 government reshuffle, make him an unpopular figure on the party’s left. Additionally, though Nicolas Sarkozy tried to push through similar reforms seven years ago, his right-wing UMP voted against reforms this time around. Their official explanation is that the law did not go far enough, but given that it went further than any of Sarkozy’s suggestions during his quinquennat, the UMP’s decision is judged by critics as merely obstructive behaviour.

Under these circumstances, it became clear that Macron’s bill would not pass easily. However, Mr. Hollande was under great pressure from Brussels to introduce changes and have reform implemented as soon as possible. The European Commission will decide on the 27th of February whether to penalise France for the breach of budget deficit rules; the acceptance of the law was also intended to play a part in positively influencing the outcome in Brussels.

Knowing what is at stake, Mr. Hollande turned to an uncommon measure; on the 17th of February, he allowed Prime Minister Manuel Valls to invoke Article 49.3 of the French constitution. This rarely-used article allows the government to pass a bill without the consent of the National Assembly, after which rivals have twenty-four hours to file a censure motion, forcing a vote of confidence on the government. It is clear that using Article 49.3 was the last resort: Mr. Macron had previously spent 200 hours debating the law in parliament, which received more than 1700 amendments from the government, but he still could not be sure of getting the necessary support from his party. Since 2008, the use of Article 49.3 was restricted to just one occasion per parliamentary session, increasing the weight of recurring to it. The last time this article was invoked was in 2006, when Hollande accused Prime Minister Dominique de Villepin of ‘a violation of parliamentary rights, an act of brutality, [and] a denial of democracy’. He now justified his current decision by saying that ‘they did not have time to take risks’, following the example of Mr. Valls, who declared that pursuing the reforms is ‘in the country’s best interest’. Sarkozy, in contrast, boasted that he never used the law, saying that using this article to convince his party and the French people about his stance would have shown his weakness as a leader. Other critics claim Hollande was wrong to use the article to pass a moderate reform. Nicolas Sarkozy was further quoted as saying that Article 49.3. is a ‘nuclear weapon’, and wasting it on the Macron law will get in the way of accepting big reform projects later.

Indeed, after numerous amendments, the most controversial parts of the bill were taken out. Shops, for example, can be open on Sunday only if the worker’s council approves of the decision. According to many economists, including members of an independent council set up by Macron to evaluate the law, the effects would be equally limited: the unemployment rate, currently at 10.3%, will not be significantly reduced. However, perhaps due to the moderate character of the law, the reaction of the French populace was not nearly as vehement as it could have been expected. The mass protests mobilising hundreds of thousands people that occurred the last time Article 49.3 were thankfully avoided.

However, Hollande is walking on eggshells. Although the president’s popularity rose significantly after the Charlie Hebdo attacks, he can easily lose this advantage if the public sees his forceful measure as the last resort of a weak leader heading a divided party. Whether the law will be successful in reaching its goals and rejuvenating the French economy highly depends on Hollande’s capacity to implement the changes. Many economists consider the reforms to be a good first step towards a more liberal economy, but say that there is still a lot of reform left to do. For example, simplifying administrations and the overly complex tax system are necessary steps in reform. The final question for the near future is if Macron’s propositions will be enough to convince the EU that France is getting on the right track and to be more lenient in their upcoming judgment at the end of the week.