Marine Le Pen’s plan for France is a recipe for stagnation

Big business will be brought onside. The bond markets will be mollified. And there will be plenty of reassuring words about dealing with the budget deficit. With the first round of voting in France’s parliamentary elections set for this week, Marine Le Pen’s Rassemblement National is preparing for government. This week it has set out a programme designed to keep investors, if not exactly happy, at least under control. There is just one catch. It is also a programme for stagnation – and that means France’s out-of-control debts are going to grow and grow. 

With only a few days left before voting, it looks increasingly likely that Le Pen’s RN will win power, with either an overall majority or a leading role in a coalition. Jordan Bardella is likely to become Prime Minister. The party has clearly decided to avoid ‘un moment Liz Truss’ by crafting an economic platform designed to keep the bond markets onside. Its wilder spending pledges, such as eliminating income tax for the under-30s, or scrapping VAT on 100 basic goods, have been dropped. Instead, it will conduct an ‘audit’ to assess the state of the national finances (which are not in a good state, in case anyone was wondering), and pledge to stick to the deficit reduction programme and the EU’s fiscal rules. The one major measure is a plan to claw back 2 billion euros a year from Brussels, a proposal that, to put it mildly, is likely to be controversial among the other 27 members.

That is, without question, smart politics. President Macron hopes the RN will crash the economy if it gets into power, discrediting Le Pen and Bardella, and paving the way for his centrist bloc to secure re-election in the presidential election due in 2027. Probably not very surprisingly, the RN has decided not to play along. Instead, it will try to stick to the spending plans, and blame a round of austerity measures on the president, while picking a fight with the EU. 

There is just one snag. It is also a recipe for stagnation. Nothing that Bardella is proposing will do anything to lift France out of its rut. Indeed, insofar as it will make any difference, it will hit output even further. Replacing a property-based wealth tax with a financial one will scare off investors and entrepreneurs, while even modest concessions on the reforms to the retirement age will only worsen the long-term fiscal outlook. 

France’s economy was already very weak, with growth of just 0.2 per cent forecast for this year. It already has a budget deficit of 112 per cent of GDP; some of the highest debts in the developed world after Japan and the US; and it will rack up another 5 per cent of GDP in fresh borrowing this year. With zero growth, its debt load will grow worse and worse every year. Le Pen’s programme may be clever politics, but it is terrible economics – and it will make the French financial crisis even worse when it finally arrives.