October 9, 2018 / 10:10 AM / 12 days ago

Macron’s bridges to investors bypass voters

LONDON (Reuters Breakingviews) - French President Emmanuel Macron is finding it easier to build bridges to investors than to voters. A conference on infrastructure hosted by his finance ministry on Monday featured several pitches for why Paris is the ideal centre to develop and finance such projects. The message resonated with fund managers and bankers, who detect a new dynamism and confidence in the euro zone’s second biggest economy. But Macron is having a harder time selling these good news stories to the French electorate. An imminent government reshuffle is unlikely to solve his problem.

French President Emmanuel Macron attends a news conference at the Elysee Palace in Paris, France, October 24, 2017. Picture taken October 24, 2017

Macron’s poll ratings have halved since he was elected in May 2017, to around 30 percent - lower than predecessor Francois Hollande’s at the same point in his presidency. Matters weren’t helped by the resignation last week of the interior minister, Gerard Collomb, a former Socialist who had backed the ex-Rothschild banker early in his presidential bid. Most devastating was the portrait that Collomb painted in chats with French media of Macron’s growing isolation from voters and even members of his own government, as well as a lack of humility.

There were no such critiques at the conference held inside the modern fortress-looking finance ministry that overlooks the Seine. Thierry Deau, chairman of the Long Term Infrastructure Investors Association, told Breakingviews the mood in France had completely changed and that the business community was imbued with more confidence in the direction that France is heading. True, strikes against rail reforms messed up one of France’s vaunted infrastructure jewels, its train network, for months earlier this year. But financiers like Deau believe Macron will plough on with reforms regardless and cite a list of other areas that still need to be tackled, such as pensions.

Macron’s undiminished zeal for economic reform and determination to cut budget deficit, which finance ministry officials see rising to 2.8 percent of GDP next year from 2.6 percent this year, may be one of the reasons that voters are already feeling jaded with their president. Households focus on their finances, jobs security, or social security safety nets, and are less concerned by the sort of achievements hailed by speakers at the infrastructure conference.

For example, Pascal Cagni, chairman of Business France, which promotes the country’s companies and business image, is right to be proud of France’s one million engineers - a number that is on a par with Germany, a more populous country - and the 38,000 graduate engineers that enter the job market every year. But young French people are likely to be more concerned by the chances of getting a decent job when youth unemployment is more than double the national rate of around 9 percent, by the affordability of housing, or what their prospects will be if they don’t have higher education diplomas.

Or take French pensioners, who have been hit by a rise in social security taxes. It will be little consolation to them that French banks, such as Natixis and Société Générale, can vaunt their ability to match infrastructure projects with global pension funds and life insurers seeking stable long-term streams of cash flows.

True, the well-oiled PR machine that is plugging Paris will help the French economy if it attracts more foreign investment and jobs to the country. As Business France’s Cagni pointed out, 28,000 foreign companies based in France account for around a tenth of jobs and a fifth of research and development spending. And France certainly has a long tradition of encouraging public and private partnership on infrastructure projects. Augustin de Romanet, the chairman of Paris Europlace, which promotes the capital as a finance centre, highlighted the public works concession given by a French king in the 18th century to create canals in Picardie, in the north of the country.

However, high-handed monarchical manners play less well these days with the French public. Voters who wanted change are irked by a politician they think is more concerned with promoting the interests of business and finance than improving their lives. They may be as proud of their country’s infrastructure as any banker but are concerned that budget cuts will hurt the services on which they rely. Until these perceptions changes, French voters’ enthusiasm for Macron may not match that of global investors.

Breakingviews

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