French President Emmanuel Macron named Michel Barnier on Sept. 6 to be his new prime minister even though he does not yet have a majority of National Assembly deputies. I continue, nevertheless, to believe Macron was right to call a snap election in June to force French voters to “clarify” their growing propensity toward the extremes. Barnier is a veteran leader of Les Republicains, the center-right party that has supported Macron’s government from the outside since Macron was re-elected in 2022.

A four-time minister in previous governments and admired for being the wily and patient EU negotiator with post-Brexit UK, Barnier will, I think, forge a coalition of Republicains, Macron’s Centrists and Socialists to govern with a program of modest but needed reforms. He may also get a pass from Marine Le Pen’s extreme right Rassemblement National (RN) since the new government is sure to be tougher on illegal immigration and adopt needed fiscal restraint. Barnier and Macron also offer Europe a leadership duo that is essential since Germany’s “red-orange-green” coalition is fraying badly. Relations with the UK’s new Labour government could also improve.

Why was Macron smart to call a snap election? The June EU Parliamentary election results were dramatically bad for Macron as his party fell behind the RN and the extreme leftwing party of La France Insoumise (LFI). and the RN. The Olympics, on which France had invested an enormous amount of capital and prestige, were about to start. If Macron had waited until the rentree in early September to call an early election, a political pall would have deepened for French voters and given the opposition time to prepare better.

There was also the brutal reality that “cohabiting” with a government led by Le Pen or LFI leader Melenchon would have been impossible. There have been three “cohabitation” governments during the Fifth Republic (1986-1988, 1993-1995, 1997-2002), but never one when the president had to govern with parties as extreme as the RN and LFI. Socialist Mitterrand and Gaullist Chirac got along reasonably well in the early cohabitations.

By quickly calling snap elections, Macron not only dared French voters to elect an extremist government that would be neo-Fascist, anti-EU, anti-Euro and racist, he forced a restructuring of French politics. The LFI pushed through a coalition with the seriously weakened Socialists and Greens to form the Nouveau Front Populaire (NFP), dominated by LFI leader Jean-Luc Melenchon, a rabble-rousing leftwing radical 

Le Pen’s RN was forced to quickly propose more moderate policies they patently did not believe in and were not adequately prepared to defend. Melenchon bulldozed the NFP coalition into adopting his objectives that were difficult for the more moderate Socialist Party (PS), notably former president Hollande. Moreover, the coalition’s Nouveau Front Populaire name raised many ghosts from the 1930s.

The snap election undoubtedly clarified the Republicains’ thinking, since they had increasingly played games with Macron’s legislative program, forcing him to resort to government by decree, using constitutional Article 49(3) at least 20 times. Their losses in the legislative election dramatized the decimation of the old ruling Gaullist party, like the Socialists, and the need to update itself to survive. Macron’s choice of Barnier may help it do that.

On economic policy, Macron had no leeway whatsoever with Brussels because France’s deficit was/is stuck at 5.6% of GDP and rising above the 2024-25 threshold negotiated, with difficulty, with the Commission. He knew neither the NFP nor the RN would be able to accept Brussels’ requirements and therefore risk a crisis in the Euro system and weakening of France’s debt rating. (In fact, the OAT spread over the bund benchmark yield, a key indicator to the Euro monetary system, rose to a high of 79 bps in June and rating agencies put France on a warning list.)  He also knew both Melenchon and Le Pen want to exit the euro but dare not say so publicly.

Reviled by the French for being arrogant and not presidentiel enough, Macron is, however, very intelligent and a successful gambler as proved by his winning breakaway campaign in 2017 that disrupted French politics. He is clearly able to assess the odds, as any brilliant investment banker must. And he has experienced advisors, including Barnier behind the scenes.

Assuming Barnier negotiates a multi-party coalition in the Assembly that can survive no-confidence motions by the RN and La France Insoumise, he and Macron face some tough challenges over the next year. Tightening fiscal policy to reduce the deficit will be a top priority in the 2025 budget, which must be voted on in the next month or so, followed by renegotiation of France’s new fiscal plan with the European Commission. Supporting German Chancellor Scholz will be important as he fights to weaken the ascendent neo-Nazi AfD party. Bolstering EU-wide aid to Ukraine will be an on-going struggle. How to deal with a possible second Trump presidency will be a major pre-occupation for all European governments. Finally, Macron and Barnier will have to face down, as always, France’s perpetual troublemakers at home, the casseurs et gilets jaunes.

Macron and Barnier will need much pluck and luck to lead France.

J. Paul Horne

(Former chief international economist for Smith Barney in Paris 1975-1998.)