In this rainy month of November 2023, birthdays intersect and spice up the news. Five years ago, it was November 17, 2018, the start of the Yellow Vest revolt, which marked a first political turning point during Emmanuel Macron’s first five-year term. One year ago, it was November 30, 2022, the appearance in the global public space of ChatGPT, the generative artificial intelligence which exponentially democratized the use of this technology. Eight years, finally, is the anniversary of the signing of the Paris climate agreement at COP21. To remember as we approach the COP28 in Dubai on November 30 (the anniversary of ChatGPT…). The capital of the United Arab Emirates which has just hosted the Dubai AirShow, the local Paris Air Show, with a shower of aircraft orders. Funny paradox before hosting a climate conference from which we expect nothing new in the fight against global warming. Otherwise it was 58°C this week in Rio de Janeiro…
Five years after his first demonstration, “Jojo the yellow vest”, as Emmanuel Macron initially kindly called him, returned home. The increase in the carbon tax, decided under the previous five-year terms to fill the pockets of the State by paying motorists from “peripheral France”, has been suspended. But the price of fuel is even higher due to the energy crisis. The war between Russia and Ukraine and the return of inflation have imposed a new global carbon tax on fossil fuels, without yet provoking a new social revolt. It must be said that States, France in particular, have put their hands in their pockets, in 2022, to try to reduce the bill for households and businesses. But this energy shield has had its day and in 2024, there will be an end to the costly budgetary support measures which made it possible to compensate for the rise in energy prices. Except for the few million motorists with modest incomes eligible for the 100 euro fuel check which the government had to grant to its majority once again in 2024. Without doubt the last…
The solution for “Jojo the yellow vest” will be to switch to electric cars thanks to social leasing at 100 euros per month, a campaign promise from candidate Macron which has just finally been launched. This is good because the first French electric “cars” costing less than 20,000 euros, state bonuses included, are finally arriving on the market. Citroen, Stellantis, Renault with its new entity Ampère and its new Twingo, all our manufacturers are fighting to resist the price war that the Chinese manufacturers and Tesla are preparing to launch. But unfortunately for Jojo, in the absence of the carbon tax, it is the nuclear or renewable electricity with which he will recharge his brand new electric car that he will have to pay for. However, it is not certain that the agreement finally concluded between EDF and the State be favorable to him.
This is because we must invest to build new electricity production and transmission capacities tomorrow. With electricity demand increasing by a third over the next decade, with a vehicle fleet that we want to massively electrify and the switch from heating to heat pumps, it is to be feared that the yellow vests of electric will succeed those of diesel, if the bill increases too quickly or too much. One thing is certain: if anyone has understood how electricity prices will evolve tomorrow following the agreement concluded between Luc Rémont and Bruno Le Maire, they should write to the editorial staff… For now , as our specialists tell us, it is a hell of a gas factory…. Whose company EDF should emerge a winner.
The Yellow Vests were also awareness of the rise in poverty in France, particularly in the suburbs and rural areas, where no one can do without their car due to a lack of public transport alternatives. Poverty which, just like the public debt which rose from 80% to 111% of GDP, is the black spot on Emmanuel Macron’s balance sheet. The Secours catholique report showed this this week with an increase of around 600,000 in the number of people living below the poverty line between 2016 and 2021. The Covid crisis has undoubtedly made things worse and the return of inflation, even mitigated by public aid, could only amplify the phenomenon in 2022 and 2023. Faced with public policies which cost “a crazy amount of money” and do not seem effective, Emmanuel Macron had bet everything on the return to full employment. Alas, the job creation machine is seizing up, as shown by the rise in the unemployment rate. And the future trend is not good, making the new Unedic convention ineffective to encourage the unemployed to return to employment. When the weather gets bad, the time is not for counter-cyclical measures, and the entire current economic strategy risks taking on water, like the floods in the North of France.
Suddenly, there’s a bit of panic at the top of the state. The virtuous course of a French economy heading towards full employment and thus mechanically restoring its public accounts through the tax and social revenues generated is no longer very credible. Hence the great nervousness reigning in Bercy as we await the new verdict from the American rating agency Standard & Poor’s on December 1st. This is because the French Treasury will never have to borrow as much as next year, with an Italian-style debt issuance program: 285 billion euros, at interest rates approaching the 3.5% or even 4%. With borrowing rates now higher than nominal growth, France is moving into a new economic normal in the worst situation, with a primary deficit (excluding debt interest) of around 3.5% of GDP.
The moment of truth is approaching and Bruno Le Maire is a little alone in seeing it and saying it… Without being visibly heard. To escape censure during the last 49.3 on the expenditure part of the budget, the executive had to concede to the PS and the Liot party 200 million additional expenditures, via a further expansion of the fuel check and an exceptional Christmas bonus for families single parents. Measures justified by the rise in poverty but which show a government in dire straits and prisoner of the budgetary blackmail of its majority. Jojo the yellow vest appears less, but he is still very present in people’s minds… The probable extension in 2024 of the possibility to pay for groceries, even if they are not immediately consumable, in restaurant vouchers (to the great dismay of Umih, the sector union) participates in the same logic.
The government is vacillating but struggling to chart a clear course. There is no question of talking about austerity and then, economists recognize that an austerity policy would be counterproductive, as the experience of the 2008 crisis showed. But we are probably experiencing the turning point of the second five-year term with pressure increasingly keen to impose a course of savings in the ministries. The only problem is that everyone, starting with Emmanuel Macron himself, has gotten used to living on credit. In 2018, he put an end to the Yellow Vest crisis by putting 15 billion euros on the table. With the Covid crisis, whatever it takes, certainly made inevitable by confinements, has become a hard drug which the executive, but also its beneficiaries, have had the greatest difficulty in doing without. Inflation added a third layer to this public spending shock. Like all addictions, it has become increasingly difficult to do without it and yet we sense that the time has come for difficult measures.
The 2024 budget bears traces of this, with the end of the shield on electricity prices and some more or less disguised tax increases or charges, such as the tax on polluting transport infrastructure, wrongly presented as a green tax. but which will be passed on to motorway users. This is only the beginning and for the government, this shift will be among the most delicate of all those it has had to negotiate. It’s not easy, when you’re already not very popular, to take measures that aren’t popular at all. The employers are the first to have understood this and even if we swear to them hand on heart that this is not the end of the supply policy, the reality is that companies will move on in one way or another. from another to the fund, through lower exemptions from charges, or even through tax increases.
Jean Pisani-Ferry, the economist who designed Macron’s program, said it very well in a recent tweet recalling a magnificent quote from Keynes: “When the facts change, I change my mind. What are you doing sir? »… An invitation to reflect which should challenge the entire political class. Starting with the President of the Republic, who would look for a personality capable of endorsing and embodying this turning point in rigor, while continuing the course of reforms… in place of Elisabeth Borne at Matignon. Any candidates?
