The two faces of Emmanuel Macron

Last weekend was a good one for Emmanuel Macron on the world stage. The French president's speech at a ceremony in Paris to mark 100 years since the end of World War I, in which he warned of the dangers of nationalism, won him praise in much of the international media. His reputation as a global statesman got a significant boost helped by the contrast with US president Donald Trump, who was mercilessly mocked for missing a memorial visit to an American military ceremony in France the previous day because it was raining too hard.

At times like this, Macron, who is just 40, often manages to look like the leader Europe and the world will need for the next couple of decades as German chancellor Angela Merkel comes to the end of her time in power. But domestically, it's a very different story. Just three days before his speech, Macron was booed by workers at a Renault factory as he tried to defend his economic policies. The previous day, he was criticised for praising Marshal Ptain, the World War I general, as a "great soldier". Ptain's reputation was irreparably sullied when he later headed the Vichy government that collaborated with Germany in World War II. At the end of October, his decision to take a few days off for a break in Normandy led to speculation that he was burning out under the pressure of the job (rumours that seemed entirely credible given that he is reported to be an obsessive micromanager who sleeps just four hours a night). Next weekend, he faces nationwide protests that aim to bring traffic on motorways to a halt over high fuel prices.

His approval ratings are dire: just 21% of voters said they have confidence in him in one poll last week less than Franois Hollande, his hapless predecessor, at the same stage of his presidency. And his En Marche party has slipped behind the far-right Rassemblement National (RN formerly the Front National) in opinion polls for next May's European elections. France is disenchanted and discouraged with its president, once again. So why has the new man whopromised to transform a sclerotic and over-taxed French economy failed to deliver?

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Meet the new boss, same as the last boss

The simple answer is that Macron, who was finance minister under Hollande, has so far continued the same policies: increasing taxes, maintaining the same eye-watering level of public spending and unsurprisingly getting the same poor economic results. The fruit never falls far from the tree. That has contributed to his collapse in popularity and the rapid departure of many of his ministers. Over the past 16 months, seven ministers have left the government including Grard Collomb, the interior minister, last month. That departure was especially notable Collomb was the first major supporter of Macron during his presidential campaign, so it is telling that even he has become completely disillusioned.

Admittedly, the roots of Macron's rapid fall from grace are multiple and complex. They result in part from a deepening cultural identity crisis and nostalgia in France (as underlined by the huge success a few years ago of Le Suicide franais, a book by the right-wing writer Eric Zemmour that argues that four decades of change have destroyed France) and a profound and growing distrust by the public in what they see as an arrogant and self-interested governing elite (a distrust compounded by Macron's disastrous communication and leadership).

Meanwhile, the country has fallen in global stature, from the fourth to the seventh largest economy in the world. France is also isolated in Europe on the two major topics of the euro where Macron wants to strengthen the eurozone through greater integration of the banking and financial system and immigration, where he has tried to position himself as the main defender of open borders against increasingly anti-immigration parties elsewhere in Europe.

Tax, spend and regulate

To be fair, utter inconsistency in what the electorate demands also plays a role: they press for reforms to improve the economy but baulk when pensions are nearly frozen or public spending curbed, as they must be to improve the public finances. Still, finding a way to sort out the economy was considered Macron's core competence, given that he was formerly an investment banker at Rothschild. Hence voters have become disenchanted by the continued huge tax burden, amounting to 45% of GDP, the slow pace of structural reforms and, above all, the lack of economic results.

The total tax take in 2018 is expected to reach €1.05trn, up from €1.038trn last year (the first time it passed the symbolic €1trn level), despite lower growth compared with 2017, when France benefited from the short-lived synchronised global growth. But even as tax continues to rise, the budget deficit remains stubbornly wide France has not run a surplus since 1974 and hence public debt is closing in on 100% of GDP. Efforts to manage the budget rather than reform it lead to short-term, trivial decisions a controversial reduction of the speed limit on regional roads, officially to reduce accidents, is expected to generate €1.2bn in revenue through more speeding tickets.

Meanwhile, corporate leaders now doubt Macron's capacity to unshackle the economy. French industry is suffering heavily from competition between Germany (which produces higher added-value products) and Spain and eastern Europe (which have lower costs). Locked into the eurozone, France cannot devaluate its currency to compensate for its deteriorating competitiveness. This has resulted in structural and deep trade deficits since 2003. The trade deficit amounted to €62bn in 2017, of which more than 70% is generated within the eurozone. This compares with a surplus of €250bn for Germany during the same period. This imbalance is also the result of too many French companies that are structurally too small to export a problem that is linked to excessive taxation that make it harder for them to invest for growth in the first place. Hence some 40% of France's exports are made by just 100 companies, such as Airbus, Dassault, LVMH, Sanofi, Renault and Peugeot.

Meanwhile, Macron has yet to deliver on many of his promises to loosen the grip of an oversized and inefficient state on the economy. The gap between theatrical speeches about a "start-up nation" and the reality is huge. Dealing with the URSAFF, the network of organisations in charge of collecting social taxes, quickly saps entrepreneurial spirits. More widely, the huge number of civil servants, at 5.5 million or nearly 20% of the working population, is broadly unchanged despite modernisation of public services that are now available online. The president complained in June that France spends "a crazy amount of dough" on welfare, yet has taken few steps that will help to solve that. The labour market is still extremely rigid and unemployment is unchanged at 9%. His only major move has been changes to working conditions and benefits for railway workers and efforts to open up the network to competition from 2023, as dictated by the European Union.

A striking lack of ambition

France recorded the lowest economic growth in Europe in the first half of 2018 at 0.4%, mainly driven by build-up of inventories. Third-quarter growth, which also came in at 0.4%, was better than many European peers, but still trailed expectations. So targeted growth of 1.5% for 2018 steadily cut from initial forecasts of 2% is now unrealistic given oil prices, rising bond yields and global macroeconomic headwinds. No wonder finance minister Bruno Le Maire had to admit that "our economic results are unsatisfactory compared to our European neighbours" when presenting his 2019 budget in September. So, too, are the measures proposed in his budget.

The overall budget deficit is set to reach €100bn (2.8% of GDP), meaning France will have to borrow a total of €228bn in 2019, including refinancing of maturing loans. Le Maire claims the wider deficit reflects changes to the way income tax is collected and that otherwise it would shrink to 1.9% but with public spending at 55% of GDP, the highest level in the developed world, expectations for smaller deficits in future should be tempered. Corporate tax will be lowered from 33%, the highest in Europe, to 32%. That's still far off Macron's promise of 25% (and the 19% rate in the UK). There have been some small steps in the right direction such as the flat tax of 30% on capital gains introduced last year, while proposed legislation that gathers together 70 laws covering cryptocurrencies and autonomous cars includes some pro-business elements.

But it is not an ambitious budget at this stage, and that is hard to understand since Macron has little effective opposition. The centre-left Parti Socialiste seems close to liquidation, the far left makes Jeremy Corbyn look like an unfettered capitalist, the centre-right Les Republicains are more divided than ever and the far-right RN has hardly any MPs. Trade unions, often the stumbling block to reform in France, represent only 9% of employees. So despite having a moment of opportunity, Macron continues to disappoint everyone, including pensioners, who are the most affected by tax increases, workers and commuters, public employees, councils and the corporate world.

For all his ambitions to be an international statesman, Macron is overlooking the advice of Charles de Gaulle, France's most famous modern leader a man he professes to admire and whose war memoirs were carefully positioned on his desk in his official photograph. "La politique la plus coteuse, la plus ruineuse, c'est d'tre petit," wrote de Gaulle: the most expensive and ruinous policy is to be small. Macron needs to think big and pursue real reforms.