French corporations prepare for upcoming political upheaval

In Aix-en-Provence, France, corporate leaders are expressing deep concerns about the country’s upcoming parliamentary election and its potential ramifications. Gathered for a business summit akin to Davos, executives are apprehensive about the volatile political climate, inexperienced policymakers, looming street protests, and the specter of widespread bankruptcies.

Since Emmanuel Macron’s pro-business reforms began in 2017, France’s business elite has largely benefited. However, with Sunday’s election expected to deal Macron’s party a significant blow and potentially elevate far-right and far-left factions, uncertainty looms large.

Ross McInnes, chairman of Safran, voiced worries about the end of a reform cycle and the challenges posed by a new political landscape. Business leaders, while cautious in public discussions, privately expressed anxiety over the rise of extreme political movements and the potential instability of future coalition governments.

The prospect of the far-right National Rally (RN) gaining substantial influence without an absolute majority raises concerns about political chaos. Leaders fear that inexperienced figures could struggle to navigate France’s complex economy, exacerbated by the possibility of increased taxes under a left-wing coalition.

Jordan Bardella, leader of RN at just 28 years old, could become France’s youngest prime minister if the party secures a significant victory. The resulting political uncertainty has already driven up borrowing costs and threatens to impact corporate investment decisions and economic outlooks.

Mathias Burghardt, CEO of Ardian France, highlighted ongoing investment decisions but noted that significant uncertainties could delay major commitments. Ana Boata from Allianz warned of rising corporate defaults amid heightened political disruption and increased financing costs.

Macron’s reform agenda, while favorable to business, has sparked social unrest in the past, such as the yellow vest protests and backlash against pension reforms. Despite winning reelection in 2022, Macron’s perceived disconnect with voters remains a concern, further complicating France’s political landscape.

The RN proposes rolling back Macron’s retirement age increase and cutting energy taxes, while the left-wing Popular Front alliance advocates for a wealth tax and higher minimum wages. A potentially unstable minority government could struggle to implement new policies amid persistent challenges and the risk of no-confidence votes.

Beyond political uncertainties, business leaders worry about the long-term implications of anti-immigration policies on France’s workforce and economic vitality. McInnes emphasized the historical role of immigration in sustaining France, underscoring demographic concerns amidst evolving political dynamics.

As France braces for potentially transformative political shifts, corporate France prepares for a new era of uncertainty and challenges ahead.

Re-reported from the article originally published in Reuters.