What would a far-right or leftwing government mean for France’s economy?
Both political forces have lavish spending plans that are spooking investors
France’s far-right and hard-left parties have for years made generous spending promises in answer to people’s grievances against President Emmanuel Macron and his centrist government.
Now they may come first and second in snap elections for the National Assembly on June 30 and July 7, with Macron’s alliance a distant third, according to opinion polls.
The possibility of the far-right Rassemblement National (RN) in government, victory for the leftwing New Popular Front (NFP) alliance or the most likely scenario of a hung parliament full of fiscal populists has rattled investors, business leaders and France’s EU partners.
What is the far right promising to do?
“Will the next government compromise or will it go crazy? If they go crazy . . . then it’s a massive crash,” said Silvia Ardagna, chief European economist at Barclays.
Marine Le Pen fought the 2022 presidential election with spending promises that would have cost more than €100bn (all figures are per annum), mostly to ease the cost of living crisis. Her RN party has yet to issue a formal programme, although it says it will confirm its priorities closer to polling day.
Jordan Bardella, the party’s president and candidate to be prime minister, has used this ambiguity to water down some RN pledges in recent days — and fight Macron’s argument that he would plunge France into a debt crisis. But even the measures he plans to keep would leave a big fiscal hole.
Bardella says one priority is to cut value added tax on energy and fuel, which is estimated to cost between €10bn and €17bn — a measure that would need Brussels’ approval. But he delayed an earlier pledge to drop the VAT on household essentials on Monday.
Bardella also says he would repeal Macron’s hard-won pension reforms and reverse the retirement age from 64 back to 62 at some undefined point starting “from the autumn”. That was expected to generate a €12bn to €13bn hole, said Éric Heyer, director of the independent economic body OFCE. The RN wants to further lower the retirement age to 60 for those who have worked for at least 40 years — a measure Bardella says would cost €1.6bn.
The RN leader pledged to first carry out an independent audit upon taking power before pursuing other costly measures. “We are going to find lots of skeletons in the closet,” he said.
How would the RN finance its plans?
The RN’s ideas are either implausible or small-scale, say economists. The party claims it would lower France’s contributions to the EU budget by €2bn — but if it tried that, Brussels could limit the EU funds that Paris is receiving.
The RN has previously said it would save €9bn by reducing immigration and cutting welfare payments and healthcare for foreign nationals.
One fiscal measure it has identified is ending tax breaks for maritime shipping companies, including French giant CMA CGM. Those were worth €5.6bn last year, but that amount was based on record turnover during the Covid-19 pandemic, and stood at €3.8bn in 2022.
RN has also said it could save €15bn by tackling fraud. But Heyer said this policy was too vague: “When they say that they are going to fight against fraud to finance their programme, it shows that they don’t have any idea how to finance it.”
Bardella acknowledged the RN had more work to do, saying recently: “We are in the process of identifying possible savings in government misspending”.
What are the plans of the leftwing NFP bloc?
The NFP has a radical tax-and-spend agenda heavily inspired by the populist far-left La France Insoumise (also known as France Unbowed or LFI).
Valérie Rabault, a Socialist candidate who is part of NFP and a former rapporteur on the French budget, told business daily Les Echos that the programme would cost a total of €106bn. Some LFI members have said even that estimate was too low.
The NFP has pledged to increase public sector wages, with Macron’s alliance estimating the measure would cost €20bn. Like the RN, the NFP would revert to 62 as the pension age, although some on the far left want to push it to 60.
It would also seek to raise the minimum pension to the same level as the minimum wage — a plan estimated to cost €25bn, according to numbers from LFI shared with the Institut Montaigne think-tank two years ago.
The left would also fund 500,000 childcare places costing €28.5bn over five years, according to the Institut Montaigne, as well as subsidise energy and increase spending on culture and sport.
How can the left pay for its spending plans?
Taxes and more taxes. Unlike the RN, it has at least offered several revenue-raising ideas to fund its plans. It would reinstate and increase the wealth tax, increase inheritance tax, reimpose an exit tax on wealthy people who move their tax residence out of France, and raise income tax and social tax payments for top earners. It would also scrap some tax breaks and credits for companies.
Manon Aubry, a far-left MEP and senior member of the NFP, said that the group’s “budget would be balanced by the end of the term”.
But can squeezing the rich really pay for such a programme? If Macron had not changed the wealth tax in 2018, it would have raised only €6bn last year, according to a government study.
Anne-Laure Delatte, at the National Council for Scientific Research, which is helping the NFP with its economic policies, said a much more progressive wealth tax — at 0.5 per cent on fortunes above €5mn, rising to 3 per cent above €1bn — could raise €15bn to €30bn a year. In total, her team believes various tax rises could bring in €54bn to €95bn.
“Half of the deterioration in France’s deficit since 2017 is from tax cuts unmatched by spending increases,” Delatte said.
But tax as a share of GDP in France is already higher than anywhere else in the OECD and the left’s programme risks cratering business confidence, undermining the economy.
How does this compare with Macron’s plans?
The far right and hard left are both promising a radical break with Macron’s pro-business agenda at the same time as blaming him and his government for a deficit that has ballooned to 5.5 per cent.
Macron’s centrist alliance has pledged a few minor giveaways to help with cost of living pressures but it is sticking to a pledge not to raise taxes. Its campaign message is that it is the only fiscally responsible party.
Before the snap election, the government was looking for a further €10bn of savings this year, after reductions of €10bn were announced in January. It said it would need to find at least €20bn next year.
“The left would cause capital flight and the far right would cause a debt crisis,” said Ludovic Subran, chief economist at Allianz. “And a technocratic government [in a hung parliament], a little bit of both. The French risk premium may not recede anytime soon.”