00:00Well, to get more insight, we can speak to senior lecturer in economics at Lancaster University, Renaud Foucault.
00:04Thanks so much for your time.
00:07All ears on Sébastien Le Corneau's first speech today.
00:10What do you think he needs to say to avoid these calls of no confidence growing?
00:18I think four words. Suspend the pension reform.
00:21This is really what the social democrats are waiting for.
00:24They said at the beginning, before Le Corneau's number one government, what they wanted was to have this suspension and to have a prime minister who accepts to rule the country with parliament,
00:35so who doesn't decide to engage the responsibility of government, the infamous 49.3 article.
00:41Le Corneau has said he's ready to do that.
00:43So if he does that, he should have the abstention, at least, of the social democrats and at the moment also the right wing.
00:50So Les Républicains, they are utterly divided. They voted together not to join the government.
00:56And five minutes later, they had seven of their members in government, but they are also very unlikely to vote against.
01:01So I would say just like those four words, I suspend the pension reform.
01:05Now, the pension reform was one of the few reforms that Emmanuel Macron pushed through and really pushed it through,
01:14all the while telling people it was a necessary measure for the country's economy.
01:18I mean, if that's rescinded, where does it leave the economy as this new government is expected to propose a new budget?
01:25It leaves the economy in limbo.
01:27So postponing to 2027, because the change in pension age was gradual, it's not a massive cost in itself.
01:35We're talking about half a billion euros. It's peanuts as compared to the rest of the problems of France.
01:39But the problem is indeed that Macron was elected and re-elected on the idea of having a pension reform and that the aging of the population and the general cost of aging, including pensions,
01:51is the number one reason for the problems of the budget of France.
01:55And so the fact that it's impossible, despite being elected twice, to actually pass a reform is sending a very, very strong message to the other parties that you cannot touch that.
02:05And so whoever is in charge of France in 2027 will inherit the same problem, exacerbated, but without any trust that even if they are elected on a platform to reform,
02:16this will survive the anger of the French voters and also of the other French politicians.
02:22So give us an idea then, if we're kicking this can down the road, I mean, where is France's economy?
02:29I mean, some in government would say, you know, they're facing a gargantuan task and it needs to be addressed urgently.
02:36Others say things aren't quite as bad as we're being led to believe.
02:41Things are, in terms of emergency for today, we're not at a time where the IMF can come tomorrow.
02:47This is largely because France has borrowed money for very cheap during the time where interest rates were very close to 0%.
02:54The problem is that now, with this 6% deficit coming, every time the government is taking new debt, it's paying more and more on additional debt.
03:03So the reason why acting now was perhaps a good idea is that acting now would have meant that whoever gets in charge in 2027
03:11would have inherited a country in which they could do something else than just cut spending and increase tax.
03:16What this would do if this local new government survived somehow in this strategy of doing nothing until 2027
03:23is that whoever gets in charge of the country will be in a situation that will be a time for a form of either massive tax increase
03:32or massive spending cut, which is, of course, a recipe for disaster in terms of popularity.
03:37So I think that's why the parties like Social Democrats, Les Républicains, were, in my opinion, a bit misguided to censor Bayrou
03:44because Bayrou was this almost messianic figure.
03:47He was ready to say, I sacrifice myself.
03:49I will do all the dirty jobs.
03:51And then they would have inherited something.
03:55Unfortunately, a bit of a connection difficulty there.
03:58No, they might get in power, I think.
04:01Sorry, I'm...
04:01Sorry, we had a slight delay.
04:03Yes, we can hear you again now.
04:04So you're just telling us how they maybe made the mistake of dismissing Bayrou in their calculations.
04:11Yes, I think they had this man who was willing to say, I do all the hard jobs.
04:16And then you inherit a country you can govern in 2027.
04:20And no, it can be a Bardella prime minister.
04:23It can be a Glucksmann, a Social Democrat prime minister.
04:26This person's first job will have to deal with an emergency budget.
04:29And what's left to play with when it comes to this emergency budget?
04:34I mean, there was that French economist, it's now been dubbed the Zuckman tax.
04:39He suggested putting 2% on the wealthiest people with 100 million euros.
04:43I mean, where are we on that?
04:45Would that not be an easier way forward?
04:48I don't think this is something that anybody seriously considers as a source, a major source of income.
04:54So the point of the Zuckman tax was something that I think is absolutely fair, is to say that people in France are upset by the fact that the very, very top earners pay relatively little tax as compared to people who earn a lot of money.
05:07But the problem of the Zuckman tax is that it was based on taxing basically 5 to 10 people.
05:12Like you really have the names of those people.
05:14And those people have very mobile capital.
05:16So what is true is that there are some loopholes in the French tax system, including a law on the holding.
05:22That means that those people can spend their money, pretending this is the business money and not their own money.
05:29And this is one of the things that Le Cornu should announce today, which is a reform of this loopholes.
05:33I think this is something that visually gives what the social democrats wanted to get.
05:38But of course, it's not the Zuckman tax.
05:40And the Zuckman tax is, I think, a very valid and serious idea, but it should come at an international level.
05:46Are there other elements that you see that should be or could be added to the budget that might provide a way through?
05:52That might provide a way through to the survival of the government.
05:58I think the main element of Le Cornu will be not to make people too angry.
06:04And so in terms of having Les Républicains stay on board, they don't want to have something that is too visually going against their agenda.
06:10And that means that, for instance, in terms of the interior minister, they will want somebody who has strong vocabulary and law and order.
06:18But it's also a bit tricky because Les Républicains, they would like people to regret Bruno Retailleau, so their own interior minister, because he wants to run for president.
06:26And so for the social democrats, it will really be about giving them a chance to say in 2027, we won.
06:34And I think this is something they could do.
06:36I think the big losers of this government might very well be Mélenchon's France on board.
06:40Because they've been saying no, no, no to everything, and they got nothing.
06:44While if the social democrats get on board by staying a bit outside of government, but they can come to 2027 and say, look, we have something that helped us tax the rich.
06:55We get the suspension of the pension reform.
06:57We are the serious people.
06:59We are the real socialists that can actually manage a country.
07:02They will be in a very strong position.
07:04So I think this is the kind of thing that Le Corneau could give them and get a win-win deal.
07:09Indeed, a lot of people looking at those future presidential elections.
07:13However, we did see the addition of one or two technocrats to this latest government.
07:17I'm wondering how you feel about the former head of the SNCF, France's main transport train network.
07:25He is now the Labour minister.
07:27I mean, it's a group that has been quick to protest in the past.
07:30What impact, what influence do you think he could have?
07:32I think it's a bit of a sense of Italy, does it?
07:37Like this idea of bringing people who are seen as apolitical when they talk about reform is giving them much more credential.
07:43And also, we talked about the presidential election.
07:46You have those people who are in charge of very contentious business, but who don't seem to have high personal ambition.
07:53So I think having people who send this image of we are technocrats, we are here to save the country.
07:58And as Le Corneau says, the only goal is to get through the crisis.
08:02If we don't have any other agenda, it's hopefully giving them the kind of strength and support that will lead them not to be too contentious and not to lead to many strikes and many highly controversial debates.
08:16Finally, you know, their goal is to get through this current crisis.
08:20But the cost of all this political instability for France.
08:24Well, the first cost, I think, is a political cost.
08:27As I said before, which show that France, even if you win an election, even if you win a second election, you will look back at the mandate of Emmanuel Macron, the two presidential mandates.
08:38And I would struggle to find a big domestic reform.
08:42Macron, number one, was I'm going to change tax, tax more carbon, tax less work.
08:47He couldn't do that after the yellow jacket.
08:49There was a pension reform plan canceled.
08:51Macron, too, was about a pension reform canceled again.
08:54So if you run on an unpopular platform, can you really change things in France?
09:00And I think it's very important because the next presidential election, like a lot in Europe, is partly about what do you think about parliamentary democracy, about democracy.
09:09When people will choose between Bardella and somebody else, it's always the same question that comes.
09:15And historically, there was this Republican front saying, no, we are the Democratic Party.
09:19We fight for a democratic way of doing things.
09:21And they are not like us.
09:23Can you still do that?
09:24Can you still say that the same way in 2027?
09:26I think that's the number one challenge of the Le Corneau government now, show that democracy still is a winning formula.
09:33Okay.
09:33We'll have to leave it there.
09:35Thanks so much for your time and speaking to us.
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