Economy will shape Macron’s euro-area manoeuvres

Significance

Macron has used his absolute majority in parliament and the weakened state of France’s unions to deliver his campaign promise to reform France’s labour laws. Yet his success is only a first step to gain credibility with Germany and thereby win its support for his plan to overhaul the euro-area -- a goal his electorate may not understand, much less share.

Impacts

• Macron’s reforms do not address wage setting or the dual-tier nature of contracts, both of which hurt competitiveness but protect workers.
• If his reforms fail to create jobs, especially good jobs, Macron may be tempted to pursue foreign policy as a means to great-power status.
• His aim of transforming euro-area governance will fail if he does not link it to improving French people’s lives.