A mid-term update on Macron’s reforms

The reforms introduced by President Macron at the start of his mandate are based on one observation: despite the resilience of the French economy in 2019, there are significant structural problems that affect companies, activity, employment and the fiscal deficit. Inadequate l abour force skills are at the core of these problems. France is suffering from the fact that it ranks far lower than other countries in terms of the skill level of its labor force , affecting the economy via a low employment rate but also via a decline in industr ial activity and a limited level of corporate modernisation. To alleviate these problems, the Macron structural reforms focus on four major themes: i/ the efficiency of the labour market and training in order to improve the match between skills and jobs, ii/ a supply-side policy in favour of companies, iii/ increased competition , iv/ public spending cuts and budgetary control. While t he yellow vest movement that started in November 2018 and spread throughout 2019 drove the government to take measures to boost household purchasing power , it did not lead Macron to abandon his reforms . The 2020 Finance Draft Bill (PLF 2020) marked the continuity of a more demand-focused policy f ollowing the demands from the yellow vests during 2019. A number of measures that are leading yet again to a delay of fiscal target , e.g. a €5 billion income tax cut for 2020, renewed indexation of pensions lower than €2,000 per month and an increase in the activity bonus. In this Special Report, we will analyse the measures taken as part of the different policies implemented and their consequences in the medium and long term. Using an econometric model, we also assess the relationship between the government's structural policies and corporate investment .