This post was originally published on this site
Emmanuel Macron wants to convince foreign investors that France remains one of Europe’s business-friendliest places, even as it will soon enter the third month of its longest-ever transport strike.
As he does every year on the eve of the Davos meeting, the French president has organized his own kind of summit in the grandiose setting of the Palace of Versailles, the former residence of the kings of France built by Louis XIV in the 17th century.
More than 200 top global executives and bankers will hear Macron and his ministers vaunt the merits of his reform agenda, and incite them to keep investing in the country. As an appetizer, the French president’s office announced on Sunday night that investment worth €4 billion had already been announced on the eve of the Choose France summit.
The Davos elite will presumably travel to Versailles today by car, not by train. The massive protest that started in early December against Macron’s pension reform plans is giving signs of petering out, with less than 5% of rail workers still on strike. But transport is still being disrupted, especially in Paris and its surrounding area.
According to a survey commissioned by the French government, 71% of foreign investors think the strikes have “a negative impact” on the country’s attractiveness. Still, there are reasons to think that the strikes will not have a major and lasting impact on the economy.
Some industries will obviously be more affected than others. Shares in French retailers Casino CGUSY, -4.18% and Fnac Darty FNAC, -1.96% tanked last week after the companies blamed disappointing performance in the last quarter of 2019 on lower sales during the Christmas season as shoppers, deterred by transport difficulties, stayed away from bricks-and-mortar outlets.
But blaming the protests may just be a good excuse for retailers, who have other problems. The publication later this week of the fourth-quarter sales of Carrefour CA, -0.14%, France’s largest retailer, should contribute to a better assessment of the real impact of the protest movement.
The shares of Casino and Fnac are down 7% and 9%, respectively, since early December — just before the strike started. But the Carrefour stock has been flat since then, in a market up 5% overall as measured by the CAC40 PX1, -0.23% index.
The impact of the strikes was, however, limited in 2019 — if only because they started in the last month of the year. The question is what consequences a prolonged movement would have if it kept disrupting transport.
Macron has now made a major concession to the protesters by scrapping half of his pension reform — the part that planned to raise the official retirement age to 64 within the next two decades. But if the president manages to keep intact the other, more significant half — a simplification of the myriad pension schemes, in the public and private sectors, that make the system indecipherable and unfair — then he might be able to get through the crisis with his reform agenda alive.
The French economy grew faster than the eurozone average last year, a rare feat, with GDP up 1.6% according to the French central bank.
That compares with Germany’s 0.6% growth. The French economy has been somewhat shielded from the global slowdown in trade, which has mostly affected capital goods. Rising uncertainty meant that businesses delayed or canceled their investment decisions. But France does not produce and export capital goods as Germany does.
French industrial production kept growing at a good pace in 2019, up 1.2% year on year in November, while it fell 1.5% in the eurozone, including a 4% drop in Germany, over the same period.
It can sustain its momentum into 2020, but nationwide town council elections in March will provide the first real electoral test of Macron’s popularity and his La République en Marche party’s political viability. Investors might choose to wait a couple of months until they have a clearer idea of how Macron will choose to spend the remaining two years of his term.
