French Political Diary - 2014

8/12/2019 French Political Diary - 2014

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F R O M T H E E X P E R T S I N A P C O S P A R I S O F F I C E

2014 FRENCH POLITICAL DIARY

1 2014 APCO Worldwide Inc. All rights reserved.

APCOs 2014 French Political Snapshots series focuses on this years string of elections the local

French elections in March, European elections in May and the elections for the French Senate in

September. The often announced, yet incessantly postponed, ministerial reshuffle may also have

an important impact on the French government making 2014 a key year in French politics.

As in our previous editions (which covered the 2012 Presidential and local elections, and last

year assessed Francois Hollandes first year in office), our objective is to put these events into

perspective. We will provide economic and political analysis, as well as forecasts aimed in

particular at international audiences. The questions we will address include: What are the current

issues? What are the opposing forces? What can we expect to happen and when?

Local Elections Two Years into Hollandes Presidency

The upcoming local elections may spur some French voters into action but leave others indifferent.

The key question is how important are these local elections? They can seem eclipsed in

importance by the major issues currently facing France including persistent unemployment, a

public deficit that may reach 2 billion by the end of 2014, taxes at an all-time high, European/

U.S. negotiations on the Transatlantic Trade and Investment Partnership (TTIP) at a stalemate

(even though theyve just begun), planned changes to European Institutions that will impact

how business is run in Europe, and international relations polarized by bloody conflicts in the

Middle East and Eastern Europe.

Yet, these local elections are indeed important for a number of reasons. Firstly, because the

democratic ideal is still a very powerful lever. French voters have the chance to highlight what

they expect from their leaders even if, in some cases, it leads to extremist protest votes

and abstentions. Secondly, voter expectations are higher than ever, as they see some of their

European neighbors seemingly starting to reap the fruits of an economic recovery, in part atleast based on austerity measures, cost-cutting plans and restructuring.

Given the unpopularity of President Hollande and his government (only 20% of the French

public support them, a record low for a president in his second year in office), the local

elections are a powerful opportunity for French voters to demonstrate their dissatisfaction.

The French public wants action that goes beyond recent government announcements (which

have presented numerous pacts, kick-start schemes and plans but few concrete measures). The

extent to which voters will express their disillusionment with the national government remains

to be seen

March 2014


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A LOOK AHEADA Chronological Snapshot of French

and International Political Milestones

INTERNATIONAL AGENDA

FRENCH AGENDA

AN OVERVIEW PRESENTED BY

Apr. 2014

Launch of the Made in Francebrand

Delivery of the Ecological TaxationCommittee Report

Proposed Decentralization legislation

June 2014

Adoption of the20142020 NationalWaste PreventionPlan

Spring 2014

EnergyTransitionlegislation

Late Spring:Parliamentarydiscussion

on theResponsibilityPact

Jan.June 2014

Greek presidencyof the EU

17 June 2014

Nationalconsultationon the circulareconomy

Summer 2014

Presentation ofproposed PublicHealth legislation

Proposed DigitalRights and Freedomlegislation

25 May 2014

Local and regional elections

2225 May 2014

European elections

4 June 2014

G5 and G8 Summits inRussia (Sochi)

Jul. 2014

PresidentialElections

Jul.Dec. 2014

Italian presidencyof the EU

Fall 2014

Handoverto the new

president ofthe EuropeanCommission

andappointment

of newEuropean

commissioners

23 Sept. 2014

UN Climate Summitin New York

4 Nov. 2014

Mid-termelections

1 Dec. 2014

InternationalSummit on

Climate

Change inLima

Jan.June 2015

Latvianpresidency of

the EU

3 Mar.6 Apr. 2014

Parliamentary recess

Mar.Apr. 2014

End of consultationswork on taxation

2015

Conference of the Partieson Climate Change

(COP21) in Paris

7 May 2015

Generalelection

23 & 30 Mar. 2014

1st and 2ndrounds

of the Frenchlocal elections

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 +

Sept. 2014

OECD Report onTaxation of the digitaleconomy in France

3rd

conference on theenvironment

Senate elections

Fall 2014

Legislation on creative work(copyright regulations; possibletax on online terminals)

20152017 Public FinancePlanning Act

At the European level, everyones attention is focused on the European Parliamentary elections

and the appointment of the new Presidents of the Parliament and the Commission, as well as

the new Commissioners (which we will discuss in a future note) but also on the new political

balances and elections in key Member States. Three issues are at the forefront of the EU

agenda for 2014: closure of a Climate Energy Bill, continuing negotiations regarding the EU-US free trade agreement (TTIP) and discussions on data protection. International agendas will

unfortunately continue to be disrupted by the need to respond to crises, be they political or

economic (Syrian and Ukrainian crises, peace process, etc.)

2014 Timeline

With three elections coming up in the next months (municipal in March, European in May

and the Senate elections in September) the French parliamentary and political agendas are

heavily loaded. There are also the issuance and discussions of several reports, Bills and awaited

reforms to consider. The most important of these include the Responsibility Pact, the Public

Health Project Bill, the Energy Transition Bill, the Creation Project Bill, and the Online Rights

and Freedoms Project Bill.


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PART ONE - 2014 LOCAL ELECTIONS:THE HOLLANDE PRESIDENCYS BUTTERFLY EFFECT?

Amid government unpopularity, the upcoming local elections will come as the first real

electoral test for Hollandes left-wing government after two years in office. Mid-term elections

are, of course, traditionally difficult for those parties in office. The opposition is counting on an

outright rejection of government policy - while the ruling majority is hoping the local nature of

this election will help to limit the damage.

A protest vote?According to the latest polls, two thirds of French people will be voting

on local issues or because they want to support a specific person or community project,

and only one third will be voting on national issues. However, given high unemployment,

economic problems and the desire to challenge authority, the Left (Socialist party and

Green allies) are likely to see abstentions among their supporters and a failure to mobilize

voters and younger voters in particular. However, for the majority of voters, taxation and

local taxes are a priority issue - on this point, national and local issues may be confused and

the governments policy could damage candidates on the Left.

A right wing ripple or tidal wave?Several factors could save the Left from a landslide

defeat. Its strong local roots (the fruits of previous elections) and more importantly, the

presence of National Front (Far Right) candidates in the second round of voting in many

towns. This could capture part of the protest vote and prevent heavy losses (preventing the

Right and Centre from winning seats).

The start of a stronger National Front presence on Frances local councils?

The National Front can only expect to win a few municipalities (maybe a dozen), but these

elections could help it to establish a foothold in local councils across France. At the otherend of the scale, these elections may also see the Communist party lose its grip on its last

local strongholds.

Different issues for large cities and rural areas.The results of these elections in some

large cities could have national repercussions. A Right wing victory in the elections for

Mayor of Paris, for instance, would give the party greater momentum going into the 2017

national elections. However, the latest polls dont suggest any changes in Paris or in the

major cities held by the Left (Lyon, Toulouse, Rennes, Nantes, Lille). The Right, however, is

expected to continue to govern Nice and Bordeaux. Uncertainty reigns in Marseille, whichcould go either way. National trends dont have much impact in rural areas, where elections

depend on local relationships and where political allegiances dont count for much.


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For the first time, votersin municipalities with 1000+ inhabitantswill elect not only local

representatives but also representatives for local confederations(of local communities,

towns, urban areas, metropolises), which will strengthen their democratic legitimacy.

Moving towards a ban on holding more than one office?A new law (effective from 2017)

bans Members of Parliament from also holding a local government office. This will force a

certain number of elected officials to choose between the two and pave the way for a new

generation of candidates. However, there is nothing to prevent an outgoing Mayor from

standing for a fifth or sixth consecutive term of office.

Accelerating a government reshuffle?There is no doubt that the outcome of the local

elections will impact the governments policy in terms of timeline (a major defeat for the

Left would encourage President Hollande to take swift action post-election) and reshuffle

(keep or replace Prime Minister Jean-Marc Ayrault, but also certain other Ministers whose

fates could depend on their personal election results). Nearly half of the members of the

government are involved in the local elections. If their local results justify their position, they

may also provide them with a possible exit route after a reshuffle.


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The Process for the French Local Elections

A three-round election system for Frances 36, 683 communes

First and second rounds: local councillors are elected for a 6-year term by universal suffrage

(all registered French and EU citizens resident in France).

Third round: the new local councils elect their Mayors and deputies.

The voting system

Constituencies with less than 3,500 inhabitants use a two-round preferential block

voting system.

Constituencies with more than 3,500 inhabitants use a two-round closed-list system. If no

list obtains an outright majority in the first round, a second round is held for lists with a

10%+ share of the vote. The inter-round period is spent forming alliances and mergers. Lists

with over 5% of the votes can join forces with a list that qualified for round two. The winner

of the second round takes half the available seats - this is called the primary majority. The

rest are allocated proportionally, based on the number of votes received, to all the lists with

at least 10% of the votes, including the winner.

A different system is used for the three largest cities - Paris, Lyon and Marseille. Each district

appoints a district Mayor and members to the city council, which then elects the city Mayor.

Two major innovations in 2014

For the first time, candidate lists for constituencies with more than 1000 inhabitants must

have equal numbers of men and women.

A single ballot has been introduced for local and community representatives who will sit on

the confederation of local communities. This reform is designed to give real democratic

legitimacy to the local confederations, which have their own fiscal powers and the authority

to act, on behalf of its member communities, on the environment, housing, roads, waste

water treatment and cultural and sports resources.


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URBANISM

Building permit

Transport

THE POWERS OFTHE MAYORPLANNING/

ENVIRONMENT

Purification Social housing

Sites protection

PUBLIC SERVICES

City work

Subscription

Public marketsmanagement

POLICE AND PUBLICSECURITY

FINANCE &MANAGEMENT

Local taxes fixation

Financial aids (companies,associations, trade union)

City loans

CIVIL STATE

Wedding registration

Birth and deathregistration

NEGOTIATION

Link with local authoritiesand intercommunity

SOCIAL ACTION

Nursery and retirementhome management

INFLUENCE &MEDIA COVERAGE

Mediator during socialplans and restructuring

Industrial and economiclocation

POLITICAL DUTY

Vote for senators

ADMINISTRATIONDUTY

Implementing the law

Elections Schedule


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PART TWO - Can Hollandes Presidency Rise from the Ashes?

Two years after the presidential elections, Frances president and his government continue to

face an extraordinary wave of unpopularity, fed by a wide range of deep-seated grievances.

On principlethe opposition is particularly virulent against the Left for winning the election,

while the right-wing press is strongly attacking the president on all fronts.

On policythe government and his majority are criticized for confusion and lack of

experience, although the president has tried to call for order among his troops on severaloccasions. Recently, the cabinets inability to decide what line to take was shown by their

hesitation over civil service salary freezes, which were initially presented as a reform under

discussion by some senior majority politicians, while the Minister of Social Affairs didnt

think it was on the agenda. More clarity, discipline and coordination between the leading

figures in the government would leave fewer issues open to interpretation and criticism.

On substancethe government is really bearing the consequences of a continuation of the

economic downturn, since the effects of its economic policy are still not being felt. The

president acknowledged in late January that there was no significant fall in unemployment

in 2013. In fact, the number of unemployed rose to 177,800 (a rise of 5.7 percent) in 2013

to a record high of 3.3 million. Expectations are high and today the government is widely

criticized for focusing on societal issues homosexual marriage in particular to divert

attention from its problems on the economic front. This criticism is all the more bitter

because these societal issues have revealed deep rifts in French society, bringing defenders

of traditional families onto the streets, as well as ecologists demonstrating (sometimes

violently) about the construction of a new airport in Nantes.

The situation, however, is in fact far more complex than it appears:

Firstly, the opposition is hostile but not yet strong enough.The UMPs (Union pour

un Mouvement Populaire) unity is threatened by the growing inclination among some of

its leaders to form an alliance with the far Right, and their inability to define a consensus

program. Lack of leadership makes their position all the more difficult and fragile given

uncertainty over a possible return to politics by former President Nicolas Sarkozy. Now

more than ever, the UMP needs to define its differences from the far Right and from the

Centre, which is somewhat gaining in strength.


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Foreign policy offers opportunities for strategic successes and diplomacy.In 2013,

Hollande was proud of the success of his operation to restore peace in Mali. If events in the

Central African Republic are more complicated, they have already led to the establishment

of a transition government. Closer to home, Franois Hollande has tried to present a

united front with Angela Merkel on introducing a financial transaction tax in Europe and to

establish a practical long-term alliance with Germany, devoid of hidden agendas.

Lastly, Franois Hollande defines the timeline. He managed to surprise everyone with

his announcement in January on the launch of a Responsibility Pact, a kind of new deal

to lower employer contributions in exchange for a promise to create jobs. This pact

surprised both sides of the political spectrum, with some socialists seeing it as a sign that

Hollande is finally prepared to adopt social-democrat commitments. Meanwhile it has split

the employer federations with the CGMPE far more skeptical than the MEDEF. Similarly,

the timing of the government reshuffle is also in Hollandes hands. Why acknowledge

the defeat anticipated by many in the European elections and the rise of the far Right

throughout Europe? Why draw attention to the local election results, which may not be that

bad if the National Front manages to upstage the UMP? Hollande may well be of the viewthat it is better to wait until the Responsibility Pact is launched and to appoint a new team

to drive it. And, hopefully, successfully deliver this flagship reform before the end of his five-

year term.


10/12




Focus on Taxation, Digital Developments, Energy and Industrial Policies

Business taxes: the government wavers between competiveness and cutting the deficit.

Consultations on taxation and the Responsibility Pact have led to several months of

negotiations on business taxes. The effectiveness of these discussions rests on the ability of

the stakeholders businesses, unions and politicians to agree on a compromise without

returning to the status quo, which wont satisfy anyone in the medium term. The key to these

initiatives is a reduction in business taxes, which are the highest in Europe (37% with additional

taxes introduced in 2013 and 2014). The government would like to bring taxation back down

to 30% to make France more competitive and prevent further erosion of the tax base. The

most probable developments will include extending the tax base and cutting tax rates. Three

other working groups are also looking at production taxes, local taxes and relations between

the state and businesses. Since these planned areas of reform cover continual compulsory

contributions, the cabinets ability to generate savings will determine any tax reductions. There

is a clear stated objective - a 50 billion reduction in public expenditure by 2017 - but no

details have yet been released on how that is to be achieved.

Digital developments: France rediscovers its ambition

Digital development, the focus of a major commitment from Hollande when he was a

presidential candidate, has become a cornerstone of the government - as the president

emphasized again just recently on his trip to Silicon Valley in February 2014, where he

inaugurated a new French Tech Hub for technology start-ups.

Implementation of Hollandes 28 February 2013 roadmap has led to major measures such

as creation of the French Tech label and a French online course platform (MOOC). The

government is also pursuing its efforts to provide high-speed Internet access throughoutFrance by 2022.

At the same time, the governments pledge not to further increase taxes has forced it to

abandon the idea of creating a new tax on devices connected to the Internet, as suggested by

the Lescure Report. It is now counting on OECD negotiations to tax Internet giants (including

international companies such as Google and Amazon who are earning large revenues in

France but pay few taxes because they are fiscally based in Dublin). The report produced by

the OECD working group on taxing the digital economy is due to be published in September

2014. The government should also present a draft two-part law on digital taxation this summer.Part one, steered by the Minister for Innovation and the Digital Economy, will cover the


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competitiveness of Frances digital economy and includes elements covered by the Philippe

Lemoine report on the digital transformation of the French economy. The second part, steered

by the Justice Minister, covers privacy and data protection. These initiatives are proof that the

government is well aware of the importance of digital developments to strategic issues and

their multi-disciplinary influence. However, France has to meet two conditions to reposition

itself in the international race: its incentives must be long-term and the new rules need to be

flexible enough to continue to drive technological innovation and new uses.

Made in France: the Cou method is no longer enough

The creation of a Ministry of Productive Recovery was designed to set the tone for a proactive

policy of industrial development and relocation. Despite the Ministers support for national

industries and Made in France, Frances industrial fabric continues to crumble. French industry

is shedding more jobs than it creates and even its flagship industries are no longer immune

to the downturn (automobile, manufacturing, etc). This, of course, has a knock-on effect on

their network of sub-contractors and suppliers (as we have seen following recent restructuring

by Alcatel-Lucent, Sanofi-Aventis and EADS). Green industries are the only sector to buck this

trend, in particular wind and solar power. During a tense situation, last September, the presidentlaunched 34 Action Plans designed to relaunch and energize French industry and steer Frances

industrial recovery. These major initiatives cover promising sectors such as renewables,

electrically powered satellites, medical biotechnologies and new generation high speed rail.

However, with weak demand in the Euro zone and a lack of resources for these 34 Action

Plans, they will not alone suffice to reverse the trend in 2014 or reduce Frances 60 billion

commercial deficit (as of the end of 2013). Lastly, only some unions and politicians were

satisfied by the Florange Law passed on February 24, which has been described as a

minimalist text, obliging companies with less than 1,000 employees wanting to close a site to

spend three months looking for a buyer first.

A new tempo for the energy transition?

Nearly eight months after the national debate on energy transition finished, the government

still hasnt followed through on what was described by Hollande as one of the most important

pieces of legislation of his presidency in September 2013. After numerous reports, the

National Energy Transition Council (CNTE) and Economic, Social and Environmental Council

(CESE) will be asked to propose legislation in April for presentation to the cabinet in June. The

lengthy delay aside, there are still a number of questions about the content. Stakeholders have

greeted the conclusions of the national debate with considerable caution, almost unanimously

deploring the lack of ambition showed by the recommendations.


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Recently, Franois Hollande tried to inject new life into the project by announcing the creation

of an energy transition airbus in partnership with Germany. However, less than two months

later the idea of creating a major Franco-German company had been ditched in favor of

an industrial and technological partnership. The greatest uncertainty, however, is over

what direction it will take, given the difficult political context. The future of the cabinets

Green ministers will be a key question for a government reshuffle. The Green party national

secretary recently voiced her concerns about the content of the proposed legislation and made

reference to a possible rift with the government on the issue. The Minister for ProductiveRecovery, Arnaud Montebourg has increased tension with the Greens by expressing his

eagerness to take back the energy portfolio following a reshuffle and airing his position on

looking at alternative methods for exploring shale gas other than hydraulic fracturing.

***

Stay tuned for the next chapter of APCOs French Political Snapshots, which will be

published after the French local elections.

ABOUT APCO WORLDWIDE

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French Political Diary - 2014

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