The French presidential election is first and foremost a decision on France’s position in Europe

The French presidential election primarily comes down to a political choice on the role that French voters want to give to France. The first round of voting showed that French electors were no longer very comfortable with the image they had of France.

The traditional governing parties did not make it through to the second round of voting. There is a deep-rooted need for change and a desire to choose the path that French society will take. This malaise can be seen in the choice electors face on Europe – for or against – and this decision overrides all other electoral considerations. We cannot compare electoral programs if the question of European membership is not clarified. This is why the economic aspects of the candidates’ programs are not decisive and voting decisions will not be based on them. Indeed, there has been little talk of economic issues since the start of the campaign, with the candidates focusing more on the over-arching framework for the country.

The predominance of politics over economics was recently witnessed in the US presidential election and in the UK referendum on Brexit. Remainers talked essentially about the economic consequences of Brexit, while Leavers talked about the United Kingdom, its people and this people’s role in the world. The US presidential election followed the same pattern. Donald Trump did not come to power on the back of his economic program, which merely reflected the idea of less State intervention from a strong and reassuring State. It was a political vision of the US, taking on the rest of the world alone, that took Donald Trump to the White House. And these factors should make us stand back and think, not focus just on the economics.

The political dimension we are witnessing at the French presidential election is the issue of its relationship with Europe. It is the most decisive differentiating factor between the two candidates in the second round of voting. The political nature of this choice, the way in which it affects the “managing of the household”, is very clear, as one candidate seeks to deepen and strengthen European institutions by joining forces with Germany to put the Franco-German alliance back at the very heart of the dynamics of Europe. The other candidate blames Europe for France’s social and economic ills and wants to renegotiate the European treaties for the country and call a referendum on exiting the European institutions in the event that this renegotiation fails. This would result in the creation of a new French currency.
The difference between the two programs could not be clearer.
These two visions of France’s place in the world reflect very different ambitions for the country and two entirely opposing policies.

Emmanuel Macron seeks openness to the world and acceptance of this global dimension. This must be the challenge that France rises to. Only this choice can lead to renewed prosperity, which will give each individual in society the ability to adapt to a changing world. This is how France can regain its place in the world and recover its ability to influence the course of History. This is choice that will get the economy moving so that it can absorb shocks and also recover quickly in order to promote employment. It implies substantial efforts to set up the framework required for each French citizen to find the necessary resources to contribute to the country’s momentum. Each French citizen has a role to play in these new dynamics.

From a European standpoint, this approach involves a deepening of the relationships and the interdependence between countries. France can rely on its partners to develop shared initiatives that enable Europe to make its choices independently. This cooperative and coordinated approach can give France the power required to have an impact on world affairs.

The opposite approach, as offered by Marine Le Pen, involves a potential change in France’s relationship with its European partners, renegotiating European Treaties to review France’s place in the institutions. Who could possibly imagine that France’s European partners would accept this approach? If the relationship with Europe cannot be renegotiated, then the candidate would organize a referendum on France’s exit from the European Union and therefore from the euro area, and a new currency framework would have to be defined. It is this very aspect that makes all the difference between Frexit and the Brexit process currently under way in the UK. Currency adds an additional layer of complexity and uncertainty that could trigger severe concerns by the French population on the country’s situation. Currency and the decision to break with European institutions would imply a government policy that aims to reduce France’s interaction with the rest of Europe and also with the rest of the world. Production momentum would not longer involve France in the same way and this could be disastrous for jobs.

In the first scenario, Macron’s program, the aim is to deepen the relationships between EU countries and very particularly within the euro area. This would strengthen economic ties and interdependence. From an economic standpoint, the single market has promoted the emergence of dense value chains, as goods are no longer made exclusively in France but rather they are part of production sequences carried out across other countries in the zone. This value chain-based economic network would therefore be strengthened, ensuring more robust growth in the long term. This ability to adapt also involves education, training and investment. The economy must be able to address the different shapes that the economic cycle can take. A choice in favor of Europe requires effort but it can set the stage for lasting and sustainable economic and employment growth.

The temptation for France to close in on itself would break these value chains, which would no longer involve the country in the same way. Italian, German or Spanish companies would find other ways to manufacture their goods without involving France, and indeed they would have no reason to include France in their operations given the uncertainty on the new currency, which would not be implemented straight away. It would also be delusional to think that France can produce all the goods it needs by itself. More than ever, France needs other countries for its manufacturing industry, and to take the opposite approach would grind its economy to a spectacular halt.

Behind this inward-looking approach is the somewhat rose-tinted nostalgia for the three post-war decades of boom in France. French growth was robust at above 5% on average in the 1950s and 1960s, the country enjoyed full employment and the economy was fairly closed and more self-sustaining in the manufacture of its goods. Value chains were broadly France-focused. But the world has changed and France no longer has the capabilities to manufacture all the goods and components it needs. This is a fact. The weakening of the relationship with other European countries that is sought here points to a return to systems that some believe to have worked successfully during that period of history. It was also a time when factories were full of blue collar workers. Then technology came along and industrial jobs plummeted. Leading electors to believe that closing the borders will generate an abundance of industrial jobs in France is at the very core of this nostalgia, but this is not how the economy works, and it would be wrong to suggest that it does.
During the 50s and 60s, France sought by all possible means to build new European institutions in order to avoid the breakout of another war. This political dimension was a source of hope for the French population, and explains the strong growth in both the economy and employment. The nation wholeheartedly supported Europe’s peace-keeping aims. Today’s ambition to cut the ties with Europe boils down to a belief that France can stand on its own and achieve by itself what it had previously accomplished with the help of Europe. The aims in the 1960s were openness to others and trading gains. This strategy was successful and can account for a hefty potion of Europe’s and France’s prosperity. French moves to withdraw into itself cannot trigger similar momentum as the country would develop a relationship of systematic mistrust with its trading and political partners. Would we have anything to gain in this situation? Certainly not.

So the political dimension of this election comes down to France’s position in Europe. The choice of openness and deepening of the union means that France must successfully rise to the challenges involved, and this is why it is key to have the wherewithal to invest heavily in education and training. Each French citizen must be able to receive training throughout their lives to help them change their lives or to support changes in the economy’s development.
The decision to look inward is a decision to limit France’s interaction with the rest of the world. Can we accept this choice that could endanger both the France of today and the country that we pass on to our grandchildren? World momentum would leave France behind, so can we really imagine that we can go it alone?

The choice facing electors is primarily a political one…looking outward to others or retreating inward, cooperation or each man for himself, the ability to influence world affairs or get left behind, forsaken by the rest of the world.

Philippe Waechter – Chief economist – Natexis Asset Management