French president aims for accelerated adoption of labour reforms following parliamentary election landslide, significantly increasing protest risks

In the second round of the French parliamentary election, President Emmanuel Macron's new party, Republic on the Move (La République en Marche: LREM), won a total of 350 out of 577 seats, alongside its centrist ally Democratic Movement (Mouvement démocrate: MoDem). The elections were a further setback for the traditional mainstream parties, particularly for the Socialist Party (Parti Socialiste: PS), whose parliamentary group lost 240 seats. Meanwhile, the anti-immigration and anti-EU National Front (Front National: FN) failed to translate its strong showing in the presidential elections to substantially increased parliamentary representation, winning only eight seats. The turnout was extremely low at 43%. This can be partly explained by "voter fatigue" because many will have been voting for the sixth time since the start of 2017. It also indicates that Macron does not have as significant a backing from the electorate at large as the size of his majority will suggest.

Labour reforms top priority

Throughout the presidential race, Macron campaigned on the promise to "unblock" France, releasing it from burdensome bureaucracy and regulation. Macron will currently aim to build on the deregulatory measures he introduced as the economy minister in the Socialist government, such as opening up heavily regulated professions to greater competition, allowing retail shops to open on Sundays, and allowing bus lines to operate on routes that compete with state-owned railways. His immediate priority will be addressing France's inflexible labour laws. The two main aspects of his proposed reforms will be capping the amount dismissed workers can claim in labour courts and decentralising collective bargaining to individual company level. Therefore, firms will no longer have to abide by sectorwide agreements, allowing them greater freedom to strike deals on pay and work time (currently capped at 35 hours per week). Macron hopes that greater flexibility will encourage businesses, particularly small and medium-sized enterprises (SMEs), to hire on permanent contracts, because the time and cost involved with shedding employees when necessary will be reduced. Reforms to the welfare system, particularly unemployment benefits, will likely follow in 2018 after the initial batch of labour reforms are passed.

Other campaign pledges such as a 50,000-person reduction in the number of civil servants and EUR60 billion (USD67 billion) in public spending cuts partially accounted for by reduced spending by local authorities and greater efficiency in the healthcare sector are likely to be introduced more gradually over his five-year tenure.

Bold foreign policy

Macron is intent on being a truly international leader and re-establishing French influence on the world stage. His inauguration parade on 14 May was charged with military symbolism and intended as a show of strength. For instance, Macron chose to ride in an open-top military jeep along the Champs-Élysées rather than the customary civilian, French-made car.

The new president's prime objective in foreign policy will be to rekindle strong Franco-German ties. His domestic reforms, which Germany has long advocated, will certainly help in the quest to regain economic credibility in the eyes of Berlin. Robust relations between the two countries will be necessary if Macron is to succeed in his long-professed aim of deepening EU integration. Greater Eurozone co-operation is his main priority, including the creation of a finance-minister post to oversee a common Eurozone fiscal policy, as well as the creation of a Eurozone budget to finance growth-oriented investments. He is also likely to favour further co-operation in the fields of energy and defence.

Macron sees the UK's withdrawal from the European Union as an opportunity for France to lure academics, scientists, tech companies, and, particularly, financial institutions, across the Channel. Macron is unlikely to be overly intransigent in negotiations, because he will also be determined to retain close diplomatic, security, and defence ties with post-Brexit Britain. Nonetheless, as a Europhile, he will be reluctant to sanction a final deal that makes it seem like Brexit is worth emulating.

Macron is likely to favour upholding current EU economic sanctions on Russia if progress on the Minsk peace agreement continues to stall and will likely push to increase the scope and scale of sanctions in case of a re-escalation of the conflict in eastern Ukraine.

Outlook and implications

After a remarkable presidential campaign, Macron's resounding victory in the parliamentary elections has been equally exceptional. Aside from his party being only slightly more than a year old and starting with zero seats in the parliament, half of the party's candidates were newcomers to parliamentary politics. Macron has fundamentally altered the French political landscape in less than six months, as shrewd political manoeuvring since his election as president has enabled him to rally moderates from the left and right around his fledgling party. The appointment of former member of the centre-right The Republicans (Les Républicains: LR) Edouard Philippe as his prime minister and the selection of PS veteran Jean-Yves Le Drian as the foreign minister have helped build a consensus around his project while also reducing the strength of opposition from traditional mainstream parties.

The new president, riding on a wave of enthusiasm following two consecutive election victories in quick succession, is likely to succeed where successive governments have failed in tackling France's restrictive labour laws. However, there is likely to be a backlash against the reforms. Unions are certain to vehemently oppose the changes and will likely organise mass demonstrations, focused particularly in Paris, but also occurring in other major urban centres. Far-left and far-right presidential candidates, Jean-Luc Mélenchon and Marine Le Pen, who together received over one-third of all votes in the presidential election first round, are also likely to encourage their supporters to join the demonstrations. Therefore, protest and strike risks are likely to increase significantly in the three-month outlook as Macron initiates the reform process. Violent confrontations with riot police are likely, resulting in property damage targeting particularly banks, multinationals, and vehicles. Economic pressure points, such as oil depots and refineries, are also likely to be targeted with blockades, intended to halt or severely reduce their operations. Macron intends to pass the reforms by "ordinance", which will require an easily achievable majority vote in the parliament and will bypass the lengthy parliamentary debate process. Therefore, the reforms are likely to be pushed through by September and adopted by the end of 2017, after which the protest movement is likely to gradually peter out.