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Elections In France and Germany Matter For The UK By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

London Marathon aside, in terms of prospective ‘political’ news events to watch today, those here in the UK concerned with the state of politics in Europe are more likely to concentrate attention on the first round of voting in the French presidential election now taking place rather than watching what is going on here at home in the early stages of the election campaign.

Amid what will probably be the highest level of security that has ever been seen across France on one single day, we are told that no fewer than 50,000 police and 7,000 soldiers will be deployed across this vast country in order to provide sufficient levels of voter security. Whilst it is true that many individual European nations have suffered some form of terrorist action or other over the past ten years, it is surely true to say that France has suffered more than most.

Politically France is not just split it is moreover quartered in respect of differing opinions. Here and now, rest assured that I am not about to even begin speculating on which two of the four main first round candidates, the conservative François Fillon, the far-right leader Marine Le Pen, the liberal-centrist Emmanuel Macron or the far-left’s Jean-Luc Mélenchon, will make it through the final round two-weeks from now, but I will say that what matters in France really should matter to us here in the UK and not just because the Brexit negotiations are shortly to begin or of our long and very interesting history, but because no matter what happens here we need a strong and politically stable France as an ally.

Having mentioned the above four candidates, it is only right that I should add that a fifth in the form of socialist, Benoit Hamon, albeit that pundits all seem to be saying that he is seen as having little chance of success.

Rarely if ever could four candidates challenging for the leadership of France have such a variety of different policy views and political objectives about what France needs and what each believes they would bring to this nation economically and dare I suggest, kicking and shouting out of the twentieth century into the twenty-first.

Of all candidates challenging for the position as President of France, National Front party leader Marine Le Pen who seeks to replace the Euro with a currency based on a basket of new national currencies that are analogous to the European Currency Unit. Le Pen says that if other Euro member states are not prepared to share her view then France will go it alone with a free-floating currency that will likely be called the New Franc that worries most.

Such things are easy to say but much harder to achieve in practice. We will see but be in no doubt that if Marine Le Pen does end up being chosen to lead France two-weeks from now France is headed for very big change that will not be to everyone’s liking. She may be anti- Euro and anti-Europe, but that does not mean that she will be friendly to Britain.

Marine Le Pen is one of two candidates that the latest opinion polls suggest will come out of the first round on top – the other is Emmanuel Macron.

Detailing policy proposals of both the above mentioned leading candidates, the highly respected London based organisation Capital Economics told us that Macron, a pro-European who seeks a common EU asylum policy and single European energy market, would if elected seek to cut government spending to 50% of GDP, limit wealth taxes to real estate.

Macron apparently intends to change the CICE tax credit system in order to reduce business costs, cut employer contributions on those workers on the minimum wage, increase social security contribution except unemployment benefits and the lowest pension incomes. He would keep the 35 hour week but allow for negotiation at company level, nationalise the unemployment insurance scheme and reform employment tribunals. Macron would remain within Schengen but boost frontier policing by 5,000 and hire 10,000 additional police officers in the first three years. Finally, he says that he would eliminate employee’s unemployment and sickness social insurance contributions.

Know best perhaps for her strong anti-Europe stance, Marine Le Pen will we are told seek to hold a referendum on France membership and as previously mentioned, abandon the Euro we are told that she would wish the Banque de France to print money to fund the Treasury and that she would reject international trade treaties. On the economy Le Pen plans reindustrialisation and intelligent protectionism whatever that is. She intends to impose taxes on hiring overseas workers and on imports whilst easing regulatory and fiscal burdens for SME’s.

Marine Le Pen has stated an intention to introduce a Purchasing power Allowance for workers and pensioners on less than EUR 1,500 per month, cut the income tax rate on the three lowest bands whilst maintaining the current rate of VAT, social insurance and maintain current rates of wealth taxation. In respect of the Labour market Le Pen has said that she would fix the retirement age at 60, maintain the 35 hour working week and only allow extension to be agreed at the branch level and paid in full whilst also making overtime tax free.

In respect of security and immigration Le Pen says that she would exit the Schengen border-free zone, hire 6,000 more customs officers, 15, 000 more police officers and create 40,000 more prison spaces by 2022. Defence spending would be boosted and legal immigration would be cut to 10,000 per year. Importantly, Le Pen says that she would introduce a proportional voting system for ALL elections in France and introduce popular referendums. There would she has said be an immediate cut in gas and electricity tariff by 5%.

We have our own election to face on June 8th and it is a fair question to ask whether we should be concerned as to what happens next in France? To me, whether France ends up going left, right or centrist, the answer is undoubtedly yes. What happens in France in two-weeks will cloud events over here just as they will in Germany and internationally. What happens in France matters and not just because it is the seventh or eighth leading economy in the world. My fear is that what happens in France could well sway various opinions over here.

Meanwhile, Germany also has an election later this year and there can be little doubt that the current Christian Democrat Union (CDU) Chancellor, Angela Merkel who is seeking a fourth four year term in office will be tested to the extreme finding sufficient coalition partners to work with. With big political changes signalled in France no matter who wins, it is interesting to remember that when Merkel helped bring about the downfall of Helmet Kohl to take over the leadership of the Christian Democrats and subsequently in 2005, narrowly beating Gerhard Schroder for the position of Chancellor, she was still relatively speaking, little known by the outside world. For background purposes, Angela Merkel joined what was the newly formed Democratic Awakening party based in what was the former East Germany only in 1999. Following German reunification later that same year, she won a seat in the German Parliament. Adopted by Helmet Kohl as his protégé, she lost little time in stabbing him in the back politically ahead of his own demise in 2000 after his refusing to reveal details of a party funding scandal.

The good news for Germany as it heads toward federal elections in September is that its economy continues to improve. Having grown by 1.9% last year, economic growth in Germany during the first quarter of 2017 was 0.4%. Tax revenues have risen as a result and this has to some extent boosted the power of the Merkel Government to spend more on the infrastructure without taking on more debt.

Again, it is her policy on immigration that has been under severe test but for now most appear to agree that Mrs. Merkel is heading for a fourth term. That, as a known quantity, is probably better for the UK than an unknown. More anon no doubt.

(Due to industry and military base visits, Commentary will be somewhat spasmodic this week in appearance)

CHW (London – 23rd April 2017)

Howard Wheeldon FRAeS

Wheeldon Strategic Advisory Ltd,

M: +44 7710 779785

Skype: chwheeldon






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