French Business Leaders Push Macron to Get on With Reforms

French business leaders called on President Emmanuel Macron to press ahead with his promised overhaul program even as the euro-area economy is showing signs of a slowdown.

Macron has shaken up the French economy with changes to labor laws and cuts to corporate taxes. Those efforts are now coming up against a broader slowdown in the euro area as trade tensions hurt exporters and industrial companies. In June, a measure of confidence in French manufacturing slumped to its lowest level in six years, according to data published Monday.

Yet with three years to go in his five-year term, Macron needs to tackle the tougher and potentially explosive parts of his plan, according to executives at an annual gathering in the French city of Aix-en-Provence over the weekend.

“The next major step is reforming the French pension system, and it will be harder than unemployment benefits,” Pierre-Andre de Chalendar, chief executive officer of building materials maker Saint-Gobain, said in an interview. “It’s about conducting a systemic reform and adapting to the new demographic context.”

In the midst of prolonged and sometimes violent ‘Yellow Vest’ street protests during the winter months, Macron responded with a series of tax cuts for consumers partly financed by raising some levies on companies. It was a gamble. Keeping businesses happy is crucial for Macron, who bet a pro-business swerve would fuel investment and hiring in an economy that has struggled for years to generate either.

Yet there are signs that the government’s efforts are bearing fruit with investment continuing to rise, unemployment falling and companies increasingly hiring on permanent contracts. They are also encouraging Chinese investment in France, according to Yan Lan, head of greater China at Lazard Ltd. bank, at a time when spending by Chinese companies abroad has declined.

“Investors aren’t less attracted to France because of the Yellow Vests movement,” said Laurence Parisot, former leader of French business lobby Medef and head of France at Citigroup Inc. “The fact that the government’s policies have a social dimension is a necessity.”

Macron’s shift in favor of households could prove fortuitous by boosting domestic demand at a time when foreign demand is wilting amid global trade tensions. A slump in German factory orders in May was the latest sign that global trade uncertainty is turning Europe’s temporary slowdown into a more serious downturn.

Business leaders at the conference praised Macron’s decision to push through a reform of unemployment benefits by decree. While job-seekers will face higher barriers to benefits, part of the plan will involve financial penalties for companies that rely on short-term contracts. Business and labor unions usually decide changes to unemployment welfare, but this time Macron’s government took control.

The reform will facilitate the return to employment for those who don’t have a job, Chalendar said.

Ross McInnes, chairman of aeronautics supplier Safran SA, said the changes were part of a string of measures that will boost the economy “far more than cheap money.”

The executives don’t see the pace of reform derailing Macron’s plans.

“The pro-business strategy remains, and of course there can be adjustments in terms of pace, but not in terms of where he’s headed,” said Stephane Boujnah, head of stock exchange Euronext NV. “Like any democratic leader, Macron needs to adjust.”



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