By Lee Thomas and Helen Reid
AIX-EN-PROVENCE, France (Reuters) – France’s business elite is worried about volatile politics, inexperienced policymakers, street protests and a possible wave of bankruptcies in the coming months, executives meeting in Provence ahead of Sunday’s parliamentary election said.
Business leaders gathering in the southern city of Aix-en-Provence on Friday and Saturday for France’s annual Davos conference were among the main beneficiaries of President Emmanuel Macron’s pro-business reforms since he was first elected in 2017.
Far-right and left-wing parties want to roll back some of Macron’s reforms, starting with raising the retirement age and scrapping a wealth tax on financial assets.
Voters are expected to block his push to ease taxes and other restrictions on business when they hand Macron’s party a decisive defeat in an election that opinion polls suggest will give the far right the most seats in parliament.
“We are very concerned about what is going to happen,” said Ross McInnis, president of the American Aerospace Corporation. saffron “Whatever political composition emerges from Sunday’s vote, we are likely to be at the end of a reform cycle that began 10 years ago,” Ronald Rickard, Britain’s deputy prime minister for the Middle East, told Reuters news agency.
While business leaders navigated the election cautiously in public forums, on the sidelines they made no secret of their concern about the rise of the far right and far left.
The far-right National Rally is likely to fail to secure an absolute majority, leaving other parties to decide whether a governing coalition can be formed, something unprecedented in modern France and likely to be unstable.
“Nothing good comes from chaos. I don’t know what will happen, but this is a country that has seen social unrest before,” said the head of a major French industrial group.
inexperienced leaders
Business leaders have expressed concern that politicians at the gates of power lack the experience to guide the eurozone’s second-largest economy, and have voiced dismay at the prospect of France’s already large tax burden growing under a left-wing coalition.
National Rally leader Jordan Bardella, 28, could become France’s youngest prime minister if the party wins a majority in Sunday’s election.
Political uncertainty has already pushed up borrowing costs in France, with bond investors demanding the highest risk premiums on equivalent German debt in 12 years after Macron called for early elections last month.
At the same time, corporate investors in the real economy are also concerned about the political and economic outlook.
“We have continued to make investment decisions over the past weeks, including in France,” said Mathias Borgardt, CEO of Ardian France Private Equity. “But it is clear that if we had to make a really big investment decision, we would probably have waited until we had better visibility.”
With no sign that political volatility will ease anytime soon, higher financing costs could soon be passed on to French companies as they prepare to roll over ultra-low-cost Covid-era loans at higher rates, executives said.
“This creates a scenario where we expect corporate defaults in France to continue to rise beyond what would have happened had such political turmoil not occurred,” Anna Boatta, head of economic research at Allianz’s trade credit insurance arm, told Reuters.
Macron’s pro-business reform drive has often angered voters, sometimes sparking violent street protests such as the yellow vest movement in 2018 or last year’s marches against pension reform.
Despite winning a second term in 2022, Macron has also failed to connect with many voters, who see him as a product of the closely intertwined political and business elites that run the country.
The anti-immigration, eurosceptic National Front party has proposed scrapping Macron’s 2023 increase in the retirement age to 64 from 62 and cutting energy taxes, saying the measures would be financed by cuts in social spending that benefits migrants.
Meanwhile, the left-wing Popular Front coalition’s tax-and-spend programme is expected to reintroduce a wealth tax and raise the minimum wage by 14%, while scrapping Macron’s proposed pension reform.
A minority government would be constrained by the risk of a no-confidence vote, which could make it less able to push through new legislation.
Beyond the possibility of a dysfunctional government, business leaders are also concerned about the knock-on effect that the National Front’s anti-immigration policies are likely to have on France’s future workforce.
“The demographics show us that we need to attract talent,” McInnis said. “This country has been dependent on immigration for 300 years.”