Macron’s Pension Gambit Sparks Revolt, Pushing France to the Brink

The French President is facing increasingly violent protests that risk scaring off the investors he has spent the past six years courting.

(Bloomberg) — It’s the stuff of nightmares for those who promote the new, dynamic France: Giant mounds of stinking garbage bags overflow from bins near the Notre-Dame cathedral in the heart of Paris, violent demonstrators in Bordeaux set fire to the majestic doors of City Hall and teargas-laced battles break out in major cities between ranks of riot police and protesters who set alight whatever they can lay their hands on. 

Such images flashing on television screens across the globe show a country set back to its demons of angry street protests that brought political crises and economic inertia to successive French presidents. And the trigger for this latest regression is the architect of change: Emmanuel Macron, whose stubborn insistence on ramming through an increase in the retirement age reignited labor unrest, deepened fissures in parliament, nearly brought down his government and now threatens paralysis for the four remaining years he gets to stay in office.

“We are in a dead-end, with no clear way out,” said Christelle Craplet, head of BVA Opinion, a French pollster. “This is a tense situation in which there is no majority to govern and no majority to topple the government either.”

As the opposing sides dig in, the stage is set for extended strikes in some key sectors and the specter of prolonged and violent demonstrations — even King Charles III was forced to postpone a planned visit to France. The turmoil risks making Macron a lame-duck president, forcing him to drop new business-friendly initiatives after his earlier policies helped make France Europe’s top destination for foreign investment and arguably the biggest beneficiary of Brexit, providing another base for financial institutions away from the UK’s political vicissitudes.

“Every other person I meet is asking about these images,” Antoine Papiernik, chairman and managing partner at Sofinnova Partners, a French venture capital investor with €2.5 billion ($2.7 billion) in assets under management, said from a conference in California. “This sticks to us and keeps coming back. France is difficult to change. If this goes on for three months, maybe the investors in our funds might see increased geopolitical risk for France.”

Macron’s effort to raise the minimum retirement age to 64 from 62 — bringing it more in line with France’s European neighbors — has touched on something deeper: the French way of life and a social model with ironclad cradle-to-grave protections. Coming on top of a war in Europe, rising food and energy prices and other economic anxieties, his determination to push ahead now has turned the reform into an existential battle coalescing all discontent.  And not just over pensions. Protesters on Saturday hurled Molotov cocktails and explosives at police at a demonstration in Western France over the construction of large reservoirs that opponents say will aggravate droughts. 

“This is a long-term fight and I really believe that after things continue to go wrong where it hurts the government, like fuel shortages or mountains of garbage, the pension reform might be withdrawn,” said Laure Lafitte, a 27-year-old childcare worker, who demonstrated on Thursday at the Bastille square in Paris along with tens of thousands of people who blew horns, shouted anti-reform slogans and set off flares.  

Their collective angst is providing fodder for the leaders of the country’s extreme parties, the far-right Marine Le Pen and Jean-Luc Melenchon on the left, who increasingly have their sights set on the après-Macron election in 2027.


This isn’t how it was supposed to be. Macron, now 45, arrived at the Élysée Palace in 2017 as its youngest-ever French president, bringing the promise of a fresh start to government and the economy after years of entrenched divisions. A technocrat who cut his political teeth in the reformist wing of Socialist President François Hollande’s government, he also spoke the language of fiscal discipline and pro-business labor reforms. A former investment banker, he had the ear of finance and tech, and a knack for wrapping his messaging in an unwavering embrace of the European Union — unlike the fringes of both the right and the left.

His extraordinary political ascension was followed by winning a large majority in parliament that allowed him to blitz through a checklist of pro-business reforms including corporate tax cuts and a shakeup of labor laws. These reduced the financial risks for companies laying off workers and  stripped down complex layers of negotiation between employees and employers.

“Despite what you see in the streets, France has become over the last decades a really, really good hub for innovation,” said Sofinnova’s Papiernik, whose firm invests in startups and early stage life science companies.

Read more: Why the French Are Angry About a Plan to Retire at 64

Macron’s first big warning of choppier waters ahead came in late 2018 with months of violent street protests sparked by the Yellow Vest movement, which shocked the nation and forced the president to drop plans for a fuel levy and ease the tax burden on low earners. 

The core of his agenda remained intact, and when it came to running for reelection last year, Macron could point to multiple signs of success: the lowest unemployment in more than a decade, economic output rebounding from the Covid pandemic faster than European peers and France topping rankings for luring investment after years of lagging behind the UK and Germany. 

But Macron’s shine had worn off for some. He was dubbed the “president of the rich” by his critics after he reduced the scope of the wealth tax in the country, whose citizens include the world’s richest man, luxury tycoon Bernard Arnault. Last year, his government shot down calls for a broad levy on windfall profits. 

Often characterized as aloof, arrogant and out of touch with the ordinary citizen, Macron won re-election after many voters cast a ballot for him in 2022 solely to block the far-right, nationalist candidate Le Pen. On the night of his re-election in April last year, Macron adopted an uncharacteristically humble tone, acknowledging that he would need to recreate a new consensual way of governing. 

A month later, Macron called union leaders to lunch to discuss the new method. François Hommeril, the leader of white-collar employees’ group CFE-CGC, remembers a convivial atmosphere accompanied by fine wine — a 2014 Chateau Pape Clément — as the president spoke of his resolve to change his ways. When talk turned to a promised pension reform, Hommeril warned that even moderate labor unions wouldn’t accept his plan of financing an overhaul by making people work longer. He suggested the tax-cutting president should instead consider how big business could contribute.

“He always answers that he agrees a bit,” Hommeril said. “Macron’s like that: he says he agrees with you, but ‘let’s still do what I say, okay?’”

With Macron’s party losing its majority in parliamentary elections in June, that approach set him on a path to an impasse. The support he needed from lawmakers in the conservative opposition withered as Macron repeatedly threatened to dissolve parliament — which could have potentially pushed them out of their seats — and his government refused to back off from raising the retirement age despite the biggest street protests in a decade and polls showing a vast majority of French people opposed it. 

On March 20, Macron’s team calculated the bill didn’t have a majority in parliament. But that didn’t stop him. Just minutes before the ballot, he opted to trigger article 49.3 of the French constitution to force it through without a National Assembly vote, provoking outright hostility even from within his own ranks. His government narrowly survived a no-confidence motion.

“I’ve always been in favor of the pension reform but I completely disagreed with the use of the 49.3 on such a sensitive and divisive subject,” said Christophe Marion, a lawmaker with Macron’s Renaissance party. “To me it was an admission of failure. I would have rather put the bill to a vote and lose.”

Macron says the reform he’s seeking is critical given France’s aging population and public debt of about €3 trillion, or 114% of annual economic output. Pushing through an unpopular reform “doesn’t make me happy,” he said in a nationally broadcast TV interview, adding, “We must go ahead because it’s in the higher interest of the nation.” 

Not everyone believes reforming the pension system was urgent. With a birthrate that’s among the highest in Europe, France isn’t faced with the same immediate demographic challenges as countries like Germany and Italy. 

“This reform addressed part of France’s fiscal challenges but the price is quite significant from a social and political standpoint,” said Thomas Gillet, an economist at Scope Ratings. “Going forward, after this pension reform, the reform momentum will slow.” 

Speaking in Brussels on Friday, Macron said he plans to continue to reform the country’s labor market. Question is, will he have enough support to do it? France’s economy is much changed from a decade ago, but there remain key unresolved weaknesses. While the employment rate is the highest since records began half a century ago, it still falls far short of those in other major European economies, and the country’s debt burden is among the largest. 

France also faces spending challenges that dwarf the €17.7 billion of annual savings the government initially estimated from the pension reform by 2030. Macron has pledged an increase of around €100 billion for the next six-year military budget and at least €50 billion to reboot the country’s ailing nuclear power sector. 

Nearer term, the economic impact of past protests and strikes in France has proven to be marginal and temporary. But that hasn’t stopped officials and economists from fretting about the scars of upheaval and blockades.

“There is a psychological effect and that one can be the most negative because our economy, our country, needs confidence,” Bank of France Governor François Villeroy de Galhau said in a radio interview this month. “It affects our confidence as consumers, it affects the confidence of entrepreneurs.”

Besides hobbling economic reforms, some see bigger risks if the mayhem continues.

“I worry about political instability in France more than I worry about the economic situation,” said Thomas Clozel, the founder and chief executive officer of Paris-based biotech company Owkin Inc., who warns that the outcome of the next presidential election could have vast implications for the business environment.

Macron came to power by creating a party that usurped the space that had been occupied by the center-right and the Socialist Party in the decades since the end of World War II. The crushing of those traditional parties together with the disillusionment with Macron risks driving more people toward the extremes. Support for Le Pen’s party, Rassemblement National, or RN, has steadily grown over the years, forcing investors to start weighing the possibility of it forming a government down the road.    

“A big and overlooked macro risk of the euro-zone is actually the RN winning a general election in France,” said Alexandre Hezez, chief investment officer at Group Richelieu, a Paris-based asset manager. “A government by a party from a political extreme is always a risk for bond markets.”

Macron can’t run for a third presidential term, but neither can he be forced out of office in the next four years. In France — which centralizes power with the executive and can sideline parliament — pressure often comes from the street. Without a retreat, the disruption is set to last.

“Yes, a reform is needed to save our pension system,” said Olivier Marleix, the head of the conservative Les Républicains party at the National Assembly. “The pension reform isn’t the problem. The problem is the president.”


–With assistance from Albertina Torsoli, Ania Nussbaum, Julien Ponthus, Phil Serafino and Marie Patino.

(Adds reference to Saturday protests in sixth paragraph.)

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