The hundred-day mark is an important checkpoint for every presidency. Mr Macron, France’s youngest leader since Napoleon, moved in the Elysée palace after an inspiring campaign which carried substantial political credit. The first days of his tenure went like a dream but clouds have rapidly started gathering around “Jupiter” (Macron has been nicknamed after the king of Roman gods, which is, one might think, more flattering than “Flamby” or “Sarko”).
So what went wrong? The first sign of trouble came with “les affaires” judiciaries which pushed four of Macron’s ministers to resign under questionable circumstances. The Minister of Justice, Mr Bayrou, who was supposed to fight political sleaze has been ironically forced to resign (alongside Sylvie Goulard) under allegations of wrongful use of European parliament assistants. Richard Ferrand resigned under allegations of nepotism, whilst the Minister for Labour Muriel Pénicaud has been weakened by an ethics probe. Then came the crisis with the army over some budget cuts which resulted in the resignation of the general-in-chief Pierre de Villiers, unprecedented in modern times with the last occurrence way back in 1958. The lack of experience of Mr Macron’s party (La République en Marche) in the parliament also cast shadows on the president’s capacity to profoundly reform the country. The icing on the cake has without a doubt been on the social front. The looming reform of the labour market, using rulings in the parliament rather than a vote and a planned housing aid cut triggered the president’s approval ratings to plummet sharply.
After a hundred days only one third of French people (36%) say they are satisfied with the President’s actions compared to François Hollande’s 46% approval ratings in 2012. This is the lowest score by a French president after the first 100 days. To put this into context, this is even worse than Donald Trump’s ratings who is embroiled in the threat of thermonuclear war with North Korea! (amongst many other concerns). The outlook is also worse as only 23% of respondents believe that the country is moving in the right direction compared to 45% in August 2007, three months after Nicolas Sarkozy’s election.
On the bright side, during the state of grace, Mr Macron delivered on some of his most iconic promises. He tore up the old partisan divisions by forming a progressive government and renewing the National Assembly in an unprecedented fashion. He reaffirmed his political priorities through government spokesman Christophe Castaner who wants to “restore the confidence of the people in our democratic institutions, renew our social model, reform our education system, bolster the ecological transition and return to the European promise.” The French president’s first three months were also marked by international issues with visits to France by US President Donald Trump and his Russian counterpart Vladimir Putin. Mr Macron put France back on the map for the rest of the world, by showing an ambitious and progressive political agenda domestically and internationally.
Mr Macron’s next obstacle will be the planned autumn social movements and already represents a tremendous challenge to his authority. It will be fascinating to see how firmly the President will deal with the street reaction as it could already be a cornerstone of his five years tenure.
Since the election, nuances around French politics have not really impacted OAT yields which have instead mostly been driven by Japanese and ECB flows. Pre-election, Nippon investors were amongst those that became net sellers as the Le Pen/Mélanchon risk intensified, pushing the 10 years OAT-Bund spread to widen from 30bps to 80bps. Post-election, they have started buying again and the spread has progressively re-tightened to 30bps. In June, Draghi’s speech at Sintra triggered a sell-off which benefited OAT’s versus Bunds while ECB QE purchases have been increasing towards France (and Italy). At this level, I would be neutral OAT-Bund spreads as they cannot get much tighter and in a risk off event Bunds would outperform.