EU’s green transition may be relatively unscathed from French election chaos

8 July 2024
By Stefano Porciello

Sunday's surprise French election result looks to be good news for the wind power sector, which was facing the threat of a moratorium advocated by the far right and could instead now hope for a boost. 

The expected winner, Rassemblement National, or National Rally, was relegated to third place after a week of tactical maneuvering, with the pro-green left-wing alliance of the New Popular Front emerging as the biggest group, but in a hung parliament.

The news also looks relatively positive for all those engaged in France's and Europe’s green transition, given that the left alliance and the current ruling group, Ensemble, together hold around two-thirds of seats in the new National Assembly.

Any relief looks like being fragile and temporary, however. No political party has the clout to rule the country, the building of a governing coalition looks extremely difficult, and any minority government looks likely to live under constant threat of a vote of no confidence. The National Rally can be expected to hammer continually at any ruling coalition and reorganize for possible new legislative elections in a year's time, or for presidential elections in 2027.

Should a left-wing government or a national unity government spanning from the center-right to the center-left be formed, France's stance on energy and climate policy at the EU level shouldn't see any major revolution, and chances are that the country's support for renewables could surprisingly have a boost.

France's role as an advocate for Europe’s decarbonization, clean electrification and re-industrialization is likely to be shielded from a major shakeup as things stand, though how temporary this could prove will only emerge over time.

Wind, nuclear, hydro

The New Popular Front campaigned to strengthen manufacturing in the French and European renewable-energy sector. Its program called for making France “the European leader in marine energies with offshore wind power and the development of tidal energy.”

At the center of the political spectrum, President Macron’s finance minister, Bruno Le Maire, has been an outspoken defender of the importance of decarbonized energy independence. 

As France recently joined other countries to make the North Sea region “the world’s largest green energy power plant” thanks to offshore wind, and given the wide political support for renewables in the new parliament, wind turbine-makers can hope for positive political developments in Paris.

Other parts of the energy industry, such as the nuclear and hydropower sectors, may remain in the political quicksand, though, but this isn't necessarily bad news. Despite uncertainty, some predictions may pan out.

Even though some on the French left would like to end the country's pro-nuclear energy tradition, it seems unlikely that any major legal change will ever get passed in parliament. The center and the right are firmly pro-nuclear, and any anti-nuclear stance has virtually no chance of passing any formal vote.

A standstill is also likely to hit the longstanding issue of the French concessions granted to the state-owned energy giant Électricité de France on hydropower, which the European Commission suspects being in breach of EU competition rules.

Here, opposition to the privatization of the dams looks too strong for a solution to be reached any time soon as both the far right and the left oppose any changes.

Opposition

At an EU level, in environmental policy terms there no longer seems to be the short-term challenge of seeing a far-right minister sitting in the Council of the EU and working in opposition to proactive laws stemming from the European Green Deal.

But the long-term implications of a possible hung parliament in Paris shouldn't be underestimated, especially if the next French government fails to make the green transition acceptable to the population. 

Meanwhile, the National Rally has 30 lawmakers in the European Parliament and will remain influential there; it may prove key in some signal regulatory battles — such as a fight set up last week by center-right lawmakers against the polluting-car ban, set for 2035.

Should the French far right not hold sway in a blocked parliament in Paris, they may try to win EU lawmaking battles in Strasbourg and Brussels and try to grab every chance for visibility by picking away at Brussels’ expensive green agenda.

EU industrial policy set to lose its cheerleader as France turns inwards

8 July 2024
By Luca Bertuzzi

Over the past five years, France has shifted the narrative around the need for the EU to wield a more muscular industrial policy to strengthen Europe's technological sovereignty.

Precisely as economic competitiveness was becoming the dominant theme in Brussels, however, France’s uncertain electoral outcome might make the country turn inward, focusing on its internal problems and political squabbles related to uneasy government coalitions.

“France has been leading in trying to put Europe at the forefront of technological development, pushing for a strong innovation and industrial policy,” Marianne Tordeux, director of public affairs at industry association France Digitale, told MLex. “Now that leadership role might have to be picked up by other countries.”

Political leadership

France has been the most influential country at the EU level in the 2019-24 European Commission mandate. Then-popular president Emmanuel Macron was at the peak of his power five years ago and managed to impose the unknown Ursula von der Leyen as commission president.

Angela Merkel’s reign gave way to a litigious coalition government in Germany. Meanwhile, with the UK leaving the EU in disarray, the camp of the free-market economies lost its most prominent advocate.

The French narrative toward a more interventionist economic policy steadily gained ground, not least because it was in line with the spirit of the times: massive stimulus packages passed in the US and China, supply-chain shocks on vaccines and chips, and wars popping up on Europe’s doorstep.

As EU policymakers scrambled to face off one crisis after the other, the idea took root that, faced with geopolitical tensions and a technological race, Europe had to take matters into its own hands with a bold industrial strategy.

Enrico Letta’s internal market report and Mario Draghi's upcoming study on the competitiveness of the European economy both build on this assumption and were meant to provide the programmatic framework for the next term.

Yet, just as France was so close to making its dirigiste doctrine the dominant theme of EU policymaking, its hardly governable political situation is set to keep the French tied up in their domestic affairs.

Regardless of the government that might eventually emerge, it seems evident that France will be more absent and less attentive to European matters. In troubled waters, the EU appears doomed to lose its political helmsman.

The personal factor

There is still someone who might keep the flame of a bold industrial policy high in Brussels. Thierry Breton was the herald of ambitious industrial plans, with a mercurial personality and the hands-on approach of the chief executive who gets things done.

Leading the charge of an interventionist economic doctrine, Breton recurrently clashed with the so-called “friends of the single market,” those upholding the principle of free trade and open economies, including EU competition chief Margrethe Vestager.

The case of Fiona Scott Morton — the US academic forced to withdraw from her appointment last year as the EU’s chief economist for competition — was, in all respects, an attack on Vestager’s legacy and an obituary to her political career, clearly showing who emerged as the ultimate winner.

Breton was probably the most influential commissioner of the last college, making everyone forget that the notion of “strategic autonomy” used to have an “open” attribute to it.

While Macron has already expressed his support for Breton to be reappointed, possibly as executive vice-president for industrial policy and economic security, a second term for the French commissioner is still far from certain.

As a coalition government seems the only way to secure a majority in a French parliament divided into three roughly equal and hardly compatible blocs, the partition of political posts will be crucial to reaching an uneasy agreement. It is unclear whether the commissioner's role will enter this equation.

Von der Leyen might also try to take revenge on Breton, who tried to undermine her candidacy by making political hay over “PieperGate” — controversy over her appointment in April of Markus Pieper, a lawmaker from her own political group, as a well-paid EU envoy.

Breton made a few enemies in Brussels, for instance, by pushing sovereignty requirements in a cloud-certification scheme, or proposing to force digital platforms to pay telecom companies for their infrastructure.

European commissioners need to be confirmed by the European Parliament following a hearing. Last time, the initial French nominee, Sylvie Goulard, did not make the cut. Breton’s audition will undoubtedly be one to watch.

A matter of money

The French vision of grandeur always runs the risk of proving impractical, and Breton’s pet projects have been no exception. Over and over again, the same problem caught up with all his ideas: lack of money.

The most telling case was the Chips Act, the EU’s response to the global supply crunch of semiconductors. Without common financial resources, the approach was to provide a legal framework for EU countries to subsidize mega fabs, as chip factories are known.

The result was that Intel and TSMC decided to build chip plants in Germany, not France, because only countries with the deepest pockets can reap the benefits of a relaxation of EU’s state aid rules.

Still, as the US Congress has recently shown, increasing public spending is usually one of the few things that brings everyone together in times of stark political divisions.

“Regardless of the political color, industrial policy is being used to buy out discontent as a substitute for more politically painful reforms like the one in the labor market,” said Niclas Poitiers, a research fellow at the think tank Bruegel.

But with the deficit at 5.5 percent of GDP, the commission’s excessive deficit procedure under way, and French state bonds on the special watchlist of credit rating agencies, France’s attempts to test the boundaries of its fiscal position might trigger financial instability across the entire EU.

The political stalemate and financial restraints bear the question of what an interventionist economic policy would look like if the government is unable or unwilling to intervene.

As usual, when France cannot achieve its ambitions on its own, it channels them via the EU. But when Breton floated the idea of the European Sovereignty Fund financed with joint debt, the answer was an abrupt no.

The only instance when Germany and the other “frugal” countries agreed to joint borrowing at the EU level was with the stimulus package intended to recover the European economies from Covid-19, and it took Merkel plenty of political capital to pull that off.

Her successor as German Chancellor, Olaf Scholz, has shown less appetite for repeating such an experiment. While negotiations on Eurobonds to finance an industrial defense strategy are advanced, the rise of pro-Putin forces in France’s extreme left and right might endanger the talks.

In a sense, the EU’s industrial approach is a major showcase of the limitations of the European project, which in essence is based on France providing the political vision and Germany supplying the financial backing as the main net contributor to the common budget.

Thus, the primary political battle for the future of the EU’s industrial policy will not be so much about the new commission’s leadership and agenda, but about the EU budget that must be in place by 2027.

“Europe is at a crossroads: does it want to have common ambitions at the industrial, technological and defense level?” asks Georg Riekeles, an associate director at the European Policy Centre think tank. “History is accelerating.”

Much of that history is bound to be written in Paris.

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