Macron Wins IMF Backing for ‘Ambitious’ Plans to Reform France

Updated on

The Meteoric Rise of France's New President

President Emmanuel Macron won support from the International Monetary Fund for his strategy of labor market reform and deficit cutting.

“We think it’s the right time for such a bold and comprehensive reform package,” Christian Mumssen, head of the IMF mission who met French officials including Finance Minister Bruno Le Maire and some French firms over the last weeks, told reporters in Paris Monday. “We were quite impressed by the new energy and the optimism.”

While the backing of the Washington-based Fund for a reform agenda is not in itself surprising, the extent of the positive language is unprecedented for any French government in recent years. France hasn’t had a balanced budget since 1974, its economic growth has lagged the euro-zone for three years and the country’s unemployment rate is almost double that of the U.K. and Germany.

“The government’s emphasis in reducing public spending is appropriate, not only is that needed to gradually reduce the public deficit and public debt but it also creates room for tax relief,” Mumssen said. Macron’s “program is ambitious, it is comprehensive but it’s also balanced and we think it could go a long way toward addressing France’s longstanding economic challenges” of high unemployment and fiscal imbalances while making France more competitive, he said.

Macron, who won office in May on promises to overhaul the labor market, restrain the budget deficit and remake the pension system, is now grappling with the realities of cutting spending and changing labor law. His government is due to publish a multi-year budget strategy and enforce changes to labor law by late September.

“The labor market strategy is broad and ambitious—it would enhance enterprise-level flexibility, reform unemployment insurance, and improve professional training and apprenticeship systems,” the IMF said in an annual report on the country. “It should be complemented by continued wage moderation.”

(Update with IMF’s Mumssen comments from second paragraph.)
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