Macron scepticism won't pay for investors



By electing Emmanuel Macron as their next president, the French have made the choice of an open, forward looking and European future. Can Mr Macron live up to his promises to revive the French economy? Financial markets have already shown signs of relief, with a sharp decrease in the price of downside protection for stocks and sovereign debt. But investors still underestimate many of the positive catalysts that macronomics could bring to the table.

President Macron’s reforms aim to shake up labour markets, but at the same time maintain a robust social safety net including healthcare and education. It is a sensible policy combination following an economic recovery that benefited asset-owners but left behind an entire young generation. In Europe, Mr Macron is likely to boost EU institutions together with a German ally, either Ms Merkel or opposition leader Martin Schulz.

The focus in Brussels has already shifted towards fiscal policy and increasing the supply of European public goods including security, infrastructure and defence. This may mean also accelerating a debt restructuring deal for Greece, which has been outperforming its budget and reform targets yet still struggles with one out of two of its young people out of work. Have markets priced all the upside from these policies? The short answer is no.

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macrocredit © 2019 by Alberto Gallo.

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