Skittish investors have been looking at France with a wary eye for some time. Recent election results have only unnerved them further—and that, followed by a contraction in French manufacturing for the first time in three months, has definitely stirred some concern.
France had been lagging behind some other Eurozone nations in recovery, under pressure from such leaders as German Chancellor Angela Merkel to institute stiffer austerity measures to cut its expenses and boost its economy. Its budget deficit had risen from 3.3% of GDP in 2008 to 7.5% in 2009, but the country had managed to beat its way back to a deficit level of 4.1% in 2013. Its goal remains to lower that figure—as indeed it is required to do by EU mandate—but it has remained unwilling to sacrifice its spending on social welfare programs.
Therefore, under President Francois Hollande, instead of tightening its belt to the degree pushed by Germany, the country instead launched several jobs programs. It also raised taxes, including a temporary 75% tax on earners of more than 1 million euros.
Unemployment has remained a thorn in the country’s side, as it has in so many Eurozone countries, and one action Hollande took early this year was the announcement of a “responsibility pact” that offered to provide lower labor taxes (the cost of funding public benefits such as medical care) to businesses that provided jobs.
His promise didn’t cut much weight with the unemployed, who, along with many across Europe, took to the polls in May’s EU elections to protest high unemployment amid a wave of anti-immigrant sentiment. Far-right nationalist parties succeeded to a surprising degree, making advances not just in France, but in numerous other countries.
The rise of far-right parties across Europe could pose a threat to business interests that rely on being able to import workers, both highly skilled and lower level, to whichever country in which they are needed. It is also a threat to those who move from place to place, seeking work. But unemployed workers, in France and elsewhere, see the tide of immigrants as a threat to their own employment situations, as recovery across the Eurozone has not brought back as many jobs as are needed.
The shock of France’s vote upholding Marine Le Pen’s National Front in the election was amplified two days later with the news that UMP, the conservative opposition party, is being investigated for misuse of funding during former President Nicolas Sarkozy’s failed 2012 reelection bid. The head of UMP, Jean-Francois Cope, has stepped down under public pressure and that leaves the door open for a new challenger in the 2017 presidential race—or for Le Pen to further advance.