There is a lot at stake for Germany in the French election. The economy is looking with concern at the situation in this important partner country.
The German economy is worried about the consequences of the parliamentary elections in France if the extreme right or the extreme left come to power there. “When analyzing the economic policy announcements of the right and the left, German and French companies come to the same conclusion: France’s attractiveness would suffer,” said Patrick Brandmaier, General Manager of the German-French Chamber of Industry and Commerce, in Paris.
In response to the defeat of his liberal forces in the European elections and the landslide victory of the right-wing nationalists, French President Emmanuel Macron dissolved the National Assembly and announced new elections for the French parliamentary chamber in two rounds for this Sunday and July 7. Macron’s presidency is not at stake.
The Chamber of Commerce president said that large increases in government spending, the reversal of reforms implemented over the past seven years and the very likely increase in taxes would not make companies optimistic. “Nor would certain announcements of moving away from Europe or questioning free trade agreements.” France’s already high national debt would probably rise even further. Rising interest rates on French government bonds would put an even greater burden on the already strained French state budget.
Economic outlook under pressure
Consumer sentiment would also be affected, as many expenses would not be made or would be postponed, which would cloud the already weak economic outlook, said Brandmaier. However, a short-term economic boost as a result of purchasing power measures such as an increase in the minimum wage or a reduction in VAT cannot be ruled out.
Employers are also waiting to see how the economic situation develops before hiring new staff. This would further exacerbate the already tense labor market situation for companies and skilled workers, explained Brandmaier. In the event of a victory for the extreme right, there would also be the question of the fate of immigrant workers who are essential for the functioning of certain sectors such as construction or catering.
Investments, growth and jobs are at stake
“In the short term, we do not expect any major changes or structuring decisions from German companies: a wait-and-see attitude prevails,” said the Chamber of Commerce head. “If competitive conditions and the economic outlook in France deteriorate, this would have an impact on investment, growth and employment in the medium to long term.”
Germany is the largest European investor in France and France is the second most important export market for German companies. “Less favorable conditions and an economic slowdown in France would therefore also put pressure on German companies.” Germany and Europe need an economically, politically and financially stable and strong France, stressed Brandmaier.
Source: Stern
