Macron-economics Impact on the Euro

11 May, 2017

Macron’s promise for reform might be much more than words – the former investment banker and Minister of Economics has been a proponent of rapid reform since his days with the Hollande administration – which he walked away from twice in protest of the snails’ pace the administration moved toward economic restructuring. His primary emphasis according to the president elect will revolve around staving off rising unemployment and making France both economically relevant and competitive again, something that it hasn’t been for decades. Markets are still skeptical though since Macron will need the National Assembly’s backing to apply any sort of reform or restructuring. Another obstacle stands between the politician and a new French economy; His party En Marche! is unproven – and with the upcoming legislative elections - sentiment regarding Macron’s ability to deliver is being further questioned. No matter what the situation at hand; the current state of the economy or market sentiment – Macron has already announced a rough outline of his economic program. Below are some of the main points:

Macron’s Economic Program

Although Macron wants to allow the work week allowing flexibility for unions and enterprise to arrange special agreements with employees. To combat the barely double digit, yet relatively high (10%) unemployment rate Marcon proposes programs that will help both low-skilled employees and unemployed youth learn applicable and ultimately employable skills. Macron has been pro-economic growth and a proponent strengthening the Euro from the beginning and this is reflected in his recommendation for a corporate tax cut in the neighborhood of 25% (a decrease of 8.3%). Also Macron seeks to lower labor charges for low income workers.

Continuing the President’s commitment to economic reform, Marcon has promised to trim the proverbial fat of the over-staffed public sector. The figures proposed are a whopping 120,000 jobs cut that will ultimately save the state a speculated 60 billion euros. This will inevitably assist Macron’s intention to invest 50 billion Euros in the public sector including investments in green energy, transportation, the aforementioned training program and agriculture. The investment will be funded via loans which take advantage of the EU’s current historic low interest rates. Sceptics of this plan have been deflected by Marcon saying a potential debt crisis will be averted due to the slow rate of growth in combination with the low interest rate.
Reduce French public debt with a target of 93.2% of the annual economic output or down 2.8% from the 2016 levels. Macron also seeks to lower the public deficit from the 2016 level of 3.4 or the projected 2.8 percent speculated for 2017 to 1.0 percent.

Markets’ Reaction to Macron’s Win

Markets are of course relieved by the election of Marcon opposed to the pro-Frexit hard-right candidate Le Pen that had the potential to destabilize not only the Euro but the EU itself, this doesn’t mean though that they have necessarily lowered their guard. This is probably largely due to the election of President Trump in the United States that promised ambitious and aggressive economic reforms during his campaign but failed to deliver on multiple of these once in office. To compound this apprehensiveness is the upcoming legislative elections that could completely hobble Macron’s ability to implement his economic plan without  the French National Assembly’s support. No matter what happens to the Euro, you will be able to stay up to date with one STO's competitive accounts – trade on our VIP account to gain access to institutional spreads as low as 0.0 pips. Follow us on social media for up to date information regarding important economic policy events, geopolitical events and other factors which affect the markets.

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