FRANCE: France's business elite is anxious about volatile politics, inexperienced policymakers, street protests and a possible wave of bankruptcies in the coming months, executives meeting in Provence said ahead of Sunday's parliamentary election.
Corporate leaders gathered on Friday and Saturday in the southern city of Aix-en-Provence for France's annual answer to Davos have been among the main beneficiaries of President Emmanuel Macron's pro-business reforms since he was first elected in 2017.
Far right and left-wing parties want to roll back some of Macron's reforms, ranging from raising the retirement age to scrapping a wealth tax on financial assets.
Voters are set to derail his drive to ease taxes and other constraints on business when – as it is widely expected – they hand Macron's party a decisive defeat in an election that polls suggest will give the far right the most seats in parliament.
"We are very concerned about what's going to happen," Ross McInnes, chairman of aerospace company Safran, told Reuters. "Whatever the political configuration that will come out of Sunday's vote, we are probably at the end of a reform cycle that started ten years ago."
While business leaders tip-toed around the topic of the election in the public panels, they did not conceal their anxiety on the sidelines over the rise of both the far-right and the far-left.
The far-right National Rally (RN) will likely fall short of an absolute majority, leaving other parties to figure out whether a coalition can be formed to govern, which is unprecedented in modern France and would likely be unstable.
"Nothing good ever comes from chaos. I don't know what's going to happen, but this is a country that has seen social unrest before," the head of a large French industrial group said.
Business leaders voiced concern that politicians standing at the gates of power lacked experience steering the euro zone's second largest economy while they also balked at the prospect that France's already considerable tax burden could grow under the left-wing alliance.
RN leader Jordan Bardella, 28, could become France's youngest prime minister if the party wins a majority in Sunday's election.
The political uncertainty has already driven up France's cost of borrowing as bond investors demanded the highest risk premiums over equivalent German debt in 12 years after Macron called the snap election last month.
Meanwhile, corporate investors in the real economy are also apprehensive about the political and economic outlook.
"We've continued to take investment decisions over the past weeks, including in France. But clearly if we had had to make a really major investment decision we probably would have waited to have better visibility," said Mathias Burghardt, CEO of Ardian France, a private equity firm.
With no sign the political volatility will subside anytime soon, the higher financing costs could soon feed through to French companies just as they are preparing to roll over ultra-low-cost loans from the COVID era at higher rates, executives said.
"That creates a scenario where we expect corporate defaults to continue to rise in France beyond what could have been if such a political disruption didn't happen," Ana Boata, head of economic research at the trade credit insurance arm of Allianz, told Reuters.
Macron's pro-business reform drive often jarred with voters, sparking sometimes violent street protests like the yellow vest movement of 2018 or marches last year against an overhaul of the retirement system.
Though he won a second term in 2022, Macron has also failed to connect with many voters, who see him as a product of the closely intertwined political and business elites that run the country.
The anti-immigration, eurosceptic RN has proposed to roll back Macron's 2023 increase in the retirement age to 64 from 62 and cut taxes on energy, saying these measures would be paid for by slashing welfare spending benefiting immigrants.
Meanwhile the left-wing Popular Front alliance's tax-and-spend programme would bring back a wealth tax and raise the minimum wage by 14% while also scrapping Macron's pensions reform.
A minority government would be constrained by the risk of votes of no confidence, likely making it less able to move ahead with new legislation.
Beyond the possibility of a hamstrung government, business leaders also worried about the knock-on impact RN's anti-immigrant policies are likely to have on France's future workforce.
"Demographics show us that we need to attract talent," said McInnes. "This country has been sustained by immigration for 300 years."