07-12-2024
France’s New Popular Front, a recently formed coalition of left-leaning parties, won the most seats, 182, in the country’s July 7 parliamentary election. President Emmanuel Macron’s Ensemble alliance took 163 seats and the conservative National Rally and its allies 143 seats.
The relatively even split means it will take time to form a government, agree on a prime minister and select a cabinet. Attention will then quickly shift to the 2027 presidential election to replace Macron. The New Popular Front has advocated for immigrants, a lower retirement age, a higher minimum wage, caps on prices and pressure on Israel to cease the Gaza war.
Key interactions with the U.S. will include the Olympics, the Russia-Ukraine war, taxation of tech multinationals, China relations, African issues including the famine in Sudan and the stalled debt restructuring process led by the French Finance Ministry’s Paris Club, and implementation and cost of climate regulations related to the Paris Agreement. The U.S. is preoccupied with its own election so there may be little chance to engage deeply until France forms a new government and the U.S. election clarifies the American policy direction.
An important issue challenging both countries is their large budget deficits. France and Italy are already over the European Union’s deficit limit and the U.S. will exceed its debt limit early in 2025. Each of the countries will be struggling to restrain spending or increase growth and revenues. France and Brazil have proposed a global wealth tax in the G20 process. With global growth slow and debt high, financial pressure is likely to continue.
The UK’s new government also faces budget and slow growth challenges, but the election outcome was clearer than in France. The Labour Party won a landslide and quickly took over the prime ministership and cabinet. It advocates mission-driven government, including faster growth, clean energy, less crime, childcare and education reforms, and improved health care.
The Labour Party opposed Brexit, Britain’s exit from the European Union, and favors closer relations with the European Union. Given Britain’s proximity to the European Union (including the border with the Republican of Ireland) and the lack of progress toward a U.S.-UK trade agreement, the expectation is that the new UK government will seek ways to work with the EU, accepting some of the regulatory standards sought by the EU.
David Malpass is the Distinguished Fellow of International Finance in the Daniels School of Business and Inaugural Fellow of Global Business and Infrastructure at Purdue@DC. He served as U.S. Treasury Undersecretary for International Affairs in 2017-2019 and as World Bank President in 2019-2023, following 24 years as a leading Wall Street economist.
