Macron, Biden and the panic

Macron, Biden and the panic

The victory of the Republican Party led by Le Pen in France and Joe Biden’s painful intervention in the debate with Donald Trump in the United States have alarmed the democratic forces in both countries. They were the direct result of the personal decisions of the two leaders. Emmanuel Macron, without consulting Prime Minister Attal or Economy Minister Le Maire, decided to call elections, perhaps believing that the other parties before Le Pen would support his project. He did not anticipate the formation of the new Popular Front, and the Macronists dropped to third place with just over 20% of the vote.

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In the United States of America, publisher of The New York Times Biden called for his resignation, and so did Financial times, Because his chances of beating Trump in November are disappearing. And even the support Biden has from 16 Nobel laureates in economics won’t be enough. Wall Street Journal He elaborated on the fragility of the current president, an old man who cannot be led. Even if Biden wins, he will be a weak president, one cannot imagine him going head-to-head with Putin, for example. How can everyone now see that Biden is incapable, despite the many previous indications already there? It is not surprising for those who are experienced in game theory: everyone knew before the debate that Biden was in trouble, but not everyone knew that everyone knew. The debate made it clear, and now it is known and cannot be hidden. The other thing is that the party’s mechanisms and interests do not allow it to be recognized abroad.

The US and France’s economic performances have not been bad. Both countries have had low unemployment levels for several years, and both are showing remarkable technological and innovative dynamism. The US, with its large digital platforms and now with artificial intelligence. France is not far behind. Macron actually designed a plan to promote artificial intelligence in 2018, and the country has been able to implement it Startups Successful companies like Mistral, a leader in the luxury goods sector, out-export all French agricultural products. But in both countries, inflation has punished the most disadvantaged segments of the population with sharp price increases. This is one reason why many workers are angry with Biden, and Trump played it up well in the debate, suggesting that inflation was the result of the president’s excessive economic stimulus. The rejection of fossil fuel taxes by rural populations, in both countries, but especially in France, is no coincidence either. Macron has been accused of favoring the rich and neglecting redistribution (even though social spending in France in 2022 was 24% of GDP, while social spending in the European Union was less than 20%). Macron has expended enormous political capital by raising the retirement age from 62 to 64, an unpopular but reasonable increase for the sustainability of pensions. Both the National Rally and the National Progressive Party want to reverse this, as well as reintroduce a wealth tax. The National Action Programme also proposes significant increases in taxes and the minimum wage.

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With just hours to go before the second round of the French elections, the most likely scenario is a parliament without a clear majority. The second scenario is a parliament with a National Front majority, which could generate further economic instability due to the potential increase in deficit and debt (5.5% and 110% of GDP in 2023, respectively). If there is instability (remember the one caused by Liz Truss’s fiscally irresponsible plan in the UK), it will be interesting to see when and how the European Central Bank might intervene to control the risk premium that France bears compared to Germany. A crucial factor for the stability of the euro.

France and the United States are similar. It is no coincidence that far-right populist movements have become strong in both countries in the dynamic of opposition between city and country, openness to the world or closedness and resentment. All this in a context where traditional parties have lost the culture wars and have been unable to respond to the concerns of a large part of the population, who have benefited least from globalization. The question is how long the populist cycle will last. In the United Kingdom, these resources seem to have been exhausted after a period of utterly incompetent Conservative government and the failure of Brexit (which the British now seem to no longer want). Perhaps this was Macron’s idea, to have the National Front govern and prove its incompetence. It was a very risky bet that could lead to instability as happened in the Fourth Republic in 1946-1958. Europe will suffer if the National Front wins an absolute majority on July 7, and the United States and the world will suffer if Trump wins in November, especially after the Supreme Court’s immunity for “official acts.” The personal decisions of political leaders have consequences.

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