Macron elected president of France

On 7 May 2017 Emmanuel Macron won the French presidential election with a pro-European, reform-minded economic programme. His victory closed an electoral cycle that had kept the markets and European capitals on edge for weeks, and opened another, that of concrete proposals: which reforms would be put forward, in what order and with what parliamentary support. For companies, that second chapter is the one that really matters, because it is where what changes in their day-to-day is decided.

For many observers, the result was good news from the point of view of European stability, because it confirmed France’s continuity in the common project. But the tone of the reactions was more sober than euphoric. An election gives a mandate, not a guarantee of success, and the work of turning a programme into applicable laws was only beginning. Ambitious programmes tend to meet resistance, and their real scope is only known over time.

What the result represents

France is the second-largest economy in the eurozone and one of the pillars of European integration. The victory of a candidate in favour of deepening that integration was received with relief in many business and financial circles. However, political relief does not equal an automatic improvement in the economic situation: growth depends on many other factors.

Moreover, the result indicated a certain orientation, but it did not clear up the underlying debates about the future of Europe, which would remain open. Companies working with France or within the eurozone may read the election as a reduction in risk, as long as they do not confuse the reduction of a particular political risk with the disappearance of general economic uncertainty. The temptation to read the result as a guarantee of growth is best avoided.

Reforms put to the test

A programme of economic reforms does not become reality simply by winning an election: it needs a parliamentary majority, negotiation and time. French companies, and those that trade with France, will have to wait and see which measures materialise and on what timetable. In politics, the distance between what is promised and what is approved can be long, and proposals sometimes change along the way.

It should also be borne in mind that every reform has winners and losers, and that those affected usually react. Taxation, the labour market or public spending are sensitive areas, where changes are discussed intensely. That process, which is part of the normal functioning of a democracy, introduces timelines and nuances that are worth following with patience. Patience, in this case, is a form of rigour: deciding when the measures are clear, not when they are announced.

Impact on those operating in Europe

A Europe with fewer political tensions removes one source of uncertainty, but it does not replace one’s own risk management. If the business has customers, suppliers or investments in France, it is worth following the announced reforms and reviewing how they might affect costs, taxation or labour relations. That avoids reacting after the event to changes that could have been foreseen. Periodic monitoring, however brief, is usually enough to spot in time what affects the business.

A good political result reduces a risk, but planning remains the responsibility of each company and each family. Keeping a diversified portfolio, well-drafted contracts and a sound financial structure is the best way to be prepared, whoever wins. This text is general information and not investment advice.

A good political outcome reduces a risk; it never removes the need to plan.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.