France’s business elite is on edge as they anticipate a new wave of political volatility that could reshape the economic landscape. Executives gathered in Aix-en-Provence for the annual meeting, dubbed France’s answer to Davos, expressed concerns over inexperienced policymakers, potential street protests, and the looming specter of bankruptcies in the wake of Sunday’s parliamentary election.
The gathering, held on Friday and Saturday, included leaders who have largely benefitted from President Emmanuel Macron’s pro-business reforms since his election in 2017. However, recent polls indicate that far-right and left-wing parties may derail these reforms, which include raising the retirement age and scrapping a wealth tax on financial assets. Many corporate leaders fear that the electorate will hand Macron’s party a decisive defeat, granting the far-right National Rally (RN) significant parliamentary power.
“We are very concerned about what’s going to happen,” said Ross McInnes, chairman of aerospace company Safran. “Whatever the political configuration that will come out of Sunday’s vote, we are probably at the end of a reform cycle that started ten years ago.”
While public discussions at the event skirted around the election’s implications, private conversations revealed deep unease about the rise of both the far-right and far-left factions. The RN is expected to win a substantial number of seats but likely will not secure an absolute majority. This outcome could necessitate coalition-building among other parties, a scenario that is unprecedented in modern French politics and could result in a fragile and unstable government.
“Nothing good ever comes from chaos. I don’t know what’s going to happen, but this is a country that has seen social unrest before,” remarked the head of a major French industrial group, highlighting the uncertainty clouding the future.
The inexperience of potential leaders has also raised alarms. With figures like RN leader Jordan Bardella, 28, poised to become France’s youngest prime minister if the party emerges victorious, business executives worry about the governance of the eurozone’s second-largest economy. As political turmoil looms, France’s borrowing costs have increased, with bond investors demanding the highest risk premiums over German debt in 12 years, following Macron’s call for a snap election last month.
Corporate investors are also feeling the strain. Mathias Burghardt, CEO of private equity firm Ardian France, noted that while investment decisions continue, major commitments are being postponed due to the unclear political outlook. “If we had to make a really major investment decision, we probably would have waited for better visibility,” he stated.
This uncertainty is compounded by rising financing costs, which could soon impact French companies as they prepare to refinance ultra-low-cost COVID-era loans at higher rates. Ana Boata, head of economic research at Allianz’s trade credit insurance division, warned that this situation may lead to an increase in corporate defaults, a trend that could be exacerbated by the ongoing political instability.
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Macron’s previous reform initiatives have often sparked public unrest, exemplified by the violent yellow vest protests of 2018 and subsequent demonstrations against pension reforms. Despite winning a second term in 2022, Macron has struggled to connect with many voters, who perceive him as part of the elite political and business class that governs the nation.
The RN’s anti-immigration, eurosceptic platform seeks to reverse Macron’s recent increase in the retirement age and reduce energy taxes by cutting welfare spending for immigrants. Meanwhile, the left-wing Popular Front alliance advocates for a wealth tax return, a 14% minimum wage increase, and the scrapping of Macron’s pension reforms.
Should a minority government emerge from the election, it could be hampered by the threat of votes of no confidence, further complicating its ability to pass new legislation. Business leaders worry not only about the immediate effects of political instability but also about how the RN’s policies might impact France’s future workforce.
As the country braces for potential upheaval, the business elite remains anxious about the implications of the upcoming election. The results will not only affect corporate strategies but will also play a significant role in shaping France’s economic future and its ability to maintain a stable and prosperous environment for business.
