Breaking down Macron Economics.

May 19, 2017

After no little drama, the centrist, pro-European, socially liberal Emmanuel Macron has been elected President of France for the next five years. His triumph over isolationist populist Marine Le Pen promises to deliver a much-needed boost to the French economy. But the former Rothschild banker’s agenda will face major hurdles, both at home and in the rest of Europe.

Macron’s signature economic promise is to slash France’s nonwage costs, in particular by radically slimming its state pension systems. Macron thinks that could cut 500 euros ($550) off the annual cost of employing someone. He has also vowed to give more freedom to companies negotiating wage deals with labor unions, to restore tax benefits on overtime, and to encourage social mobility by subsidizing the hiring of people from France’s most deprived areas. All this is aimed at cutting the country’s 10% unemployment and narrowing the deficit in a budget that hasn’t been balanced in 30 years.

If Macron can do that, he may have half a chance of persuading Germany, finally, to accept the need for a common treasury and budget for the euro­zone. Analysts say this is the long-term fix that could save the single currency, but Angela Merkel and her forebears have rebuffed similar demands from Paris for decades, wary of bankrolling other countries’ spending.

Before he can do anything, though, Macron must win enough support in France’s June 18 legislative elections to push through reforms—which are bound to offend large parts of a sprawling public sector. If this election doesn’t go as well as his last, he could become yet another ineffective French President.

A version of this article appears in the June 1, 2017 issue of Fortune with the headline “Macron Economics.”

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