Pension Reform in France – Can Macron Strike a Balance Between Work and Workers?

The combination of aging demographics and declining birth rates have many European leaders worried about their future workforce. In France, this concern resulted in political chaos when constitutional provision 49.3 was invoked by French Prime Minister Elisabeth Borne in March.

In simple terms, the 49.3 provision allows the executive branch to bypass the National Assembly and pass legislation directly. Macron’s government used this tool, which many deem to be executive overreach, to codify pension reform into law.

President Macron intends to raise the age for which an individual can collect their pension by three months every year until it reaches 64 in 2030, thereby upping the retirement age from 62 to 64 years old. The night that 49.3 was used to pass the reform, angry protesters stormed the streets all over France. Many felt that their President was out of touch with reality.

“Choose France”

The reform shouldn’t come as a surprise as this isn’t the first time Macron has tried to tackle the pension system (a previous attempt in 2018 was a short-lived failure). Reinforcing the economy through work has long been a part of his political strategy for France.

In May, as protests around the country continued to rage on, Macron hosted over 200 international business leaders in Versailles for the sixth edition of his “Choose France” summit. The protests did not seem to spook investors, as the summit raised the most funds since its inception in 2018. Investors promised over 13 billion euros combined, an increase of more than 3 billion euros from last year. Elon Musk walked away from the summit, promising that Tesla would make significant investments in the country in the near future. Investments ranged from US company Palantir’s plan for an AI R&D center to German company Marvel Fusion’s planned investment in research to speed up fusion technology.

France has now been ranked as the most attractive European country for foreign direct investment - the fourth year in a row. Economically, these political decisions have been positive for France. In 2022, its economy grew by 2.6%. Other strong economies did not fare as well. Germany, for example, experienced a 1.9% growth in comparison.

But Also Choose Europe

Just before hosting “Choose France,” President Macron penned an op-ed in the Financial Times that laid out his plans for re-industrialization. While emphasizing his commitment to rebuilding French industry, the French President also argued for a European rebuild.

Laying out the five pillars for Europe to pursue reindustrialization and, in turn, encouraging European sovereignty, the President’s main message was clear: “Made in Europe should be our motto.” The pillars lay out a sort of loose road map: deepening the single market, further developing industrial policy, enforcing protective policies for strategic interests, establishing a trade agenda in line with political ambitions, and finally, promoting multilateral solidarity.

Critics of the plan have argued that, once again, France is pursuing its own industrial interests under the guise of “Europeanism.” And yet, France is an effective guinea pig for Europe in pursuing more aggressive economic policies. Under President Macron, France has become a start-up hub, a foreign direct investment hot spot, and has aspirations to become the financial center of Europe, a possibility that could become a reality.

While it can be argued that industry interests are at odds with the member states, France's political ambitions line up with those of the EU. The broader French strategy for re-industrialization places the green transition at the top. In order to achieve the ambitious green plan Europe has set out, it needs buy-in. France is clearly on that path. The most recent “Choose France” summit reflected that, with more than half of the investments announced in the renewable and low-carbon energy sectors.

A Renewed Social Contract

And yet, what is the future of work without the workers? Domestic realities in France may curb aspirational business ventures. Up to this point, investors seem to have not been fazed by the ongoing protest. Yet companies may not remain in France much longer if their buildings are repeatedly invaded by angry protesters (BlackRock, for example, was stormed by protesters in both 2020 and now again in 2023).

Attempts to appease French citizens were announced as the “100 days of peace, unity, ambition, and action for France.” While President Macron did not deliver the promised 100-day speech symbolically scheduled for Bastille Day on July 14th, he did give a televised interview on July 24th to provide an update to his citizens. In front of 7 million people, the President renewed his support for his Prime Minister and her efforts to find a new pact for work in France and again emphasized the importance of the green transition and the role industries will play on this issue. The speech left many with more questions than answers on the government’s plans.

Striking a balance between the work and the worker and delivering a new French social compact that appeals to both will be, if successful, a lasting legacy for Macron’s government. But at the end of the day, businesses do not vote. People do. Failing to deliver on his promise will create societal and political instability. And if Macron’s government is unsuccessful in convincing citizens of the good of its policies, future election results will reflect that. Currently, it’s clear that the French people have not yet been convinced. In a recent poll, if the French were to vote tomorrow: far-right Marine Le Pen would win easily. A Le Pen presidency would make for a very different France and a very different Europe.

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