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Two years into presidency, Macron refocusing economic reform drive

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Source: Reuters

When Emmanuel Macron became French president two years ago he promised a clean break with the past. Within months of taking office he had cut tax on companies and investors and made hiring and firing easier via changes to labor laws.

Two years on, and after six months of ‘yellow vest’ street protests against his pro-business reform drive, the 41-year-old former investment banker is steering the economy with a new focus on households and boosting their incomes.
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His juggling act – keeping his reform drive alive while making concessions to protesters – has boosted growth, economists say, while investment is firm and unemployment down.

Faced with the protesters’ accusations that he was ignoring workers and pensioners, and with the sometimes violent demonstrations causing weekly disruption in cities across France, Macron changed tack.

After a package of concessions in December worth more than 10 billion euros ($11.23 billion), Macron announced income tax cuts last month worth a further five billion euros.

To pay for it, he aims to delay tax cuts for some companies and close corporate tax loopholes. Spending cuts have also been promised, although no details have been given.

“Public policy is swinging back to supporting demand and households to the detriment of competitiveness because we don’t have any extra margin to do both at the same time,” said economist Emmanuel Jessua with think-tank Rexecode.

France’s international partners say that is a fair price to pay if it helps keep the peace and allows Macron to push ahead with further reforms.

“Overall France needs to consolidate because the deficit and debt are too high,” a senior IMF official said in Paris last week, adding: “There could be some flexibility to respond to social concerns and to find a renewed consensus to continue pushing the reform process forward.”

STRIKE A BALANCE

Macron’s concessions, made up mainly of tax breaks targeting low-income workers and pensioners, could push growth to 1.5% this year, the OFCE economics think-tank estimates. Without that public money, growth would be closer to 1%, OFCE economist Mathieu Plane said.

But the fiscal stimulus risks pushing the budget deficit further than planned over a 3% limit, which the government expects to temporarily overshoot this year due to a long-planned tax change.

By contrast Germany, ever hesitant to loosen the purse strings even as a slowdown in international trade weighs on its economy, is expecting growth of only half a percent this year.

“If Emmanuel Macron is able to get out of the domestic social crisis, there are some sources of growth,” Plane said.

“Mixing supply-side policy with measures focused on boosting demand and purchasing power can help strike the right balance.”

As Macron begins the third year of his five-year term, he can claim his policy steps are beginning to bear fruit, though economists caution it will take years before their success or failure is fully clear.

The labor market is looking its perkiest in years, with unemployment at a near 10-year low and the employment rate at its highest since 1980. Youth unemployment has fallen sharply.

The percentage of new workers hired on permanent contracts, which employers avoided until Macron eased rules on firing, has risen to a record high of nearly 50 percent.

People are starting new businesses in record numbers and the business climate has changed enough in two years to make France a top destination for foreign investment, according to U.S. consulting firm ATKearney.

It ranked France fifth worldwide as a place for foreign investment, up two spots from last year despite the images of “yellow vest” street clashes and vandalism beamed around the world.

With major overhauls to the unemployment and pensions systems due this year, big foreign companies like staffing company ManpowerGroup, which has its biggest market in France, are convinced Macron will stick to his reform program.

“Overall, the French government is intent on making France more competitive as a place to invest and as the place to grow. And I don’t see that changing,” ManpowerGroup CEO Jonas Prising said in a recent earnings call.


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24 Hours Across Africa

Kenya: Popular author and gay activist dies.

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Kenyans prolific writer Binyavanga Wainaina, who was born in Nakuru in Rift Valley Province has died after a short illness in Kenya.

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He is popularly known for his debut book, a memoir entitled One Day I Will Write About This Place, was published in 2011.

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In January 2014, in response to a wave of anti-gay laws passed in Africa, Wainaina publicly announced that he was gay, first writing a short story that he described as a “lost chapter” of his 2011 memoir entitled “I am a Homosexual, Mum”, and then tweeting: “I am, for anybody confused or in doubt, a homosexual. Gay, and quite happy.

Prize-winning Kenyan writer Binyavanga Wainaina has died in Nairobi after a short illness at the age of 48.

Wainaina was also named among Time Magazine’s 100 most influential people in 2014 for his gay rights activism.

He “demystified and humanized homosexuality” author Chimamanda Ngozi Adichie wrote at the time.

Wainaina was one of the first high-profile Kenyans to openly declare he was gay and “he felt an obligation to chip away at the shame” that people felt about being gay, Adichie added.

Wainaina challenged Kenyans to rethink their negative stereotypes about homosexuality, Nyabola added.

“Inasmuch as homosexuality is illegal in Kenya, there are people who are very comfortable with their identity… but the public space for acceptance and respect has always been lacking and even characterised by violence,” Nyabola said.

“What he said is ‘look I’m here and I’m still the same person that you know and love and respect ‘… I think it’s incredibly powerful,” she added.

Homosexual relations are currently illegal in Kenya but the Supreme Court is due to rule on Friday whether to overturn the law banning them.


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Nigeria: Reps Adopt Bill Banning Use Of Plastic Bags

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plastic use ban in nigeria

News coming out of Nigeria says that the house of representatives on Tuesday passed a bill banning plastic bags in the country.

The lawmakers said the bill is to among other things address waste management and protect the environment.

The Plastic bag prohibition bill provides for: “An act to prohibit the use, manufacture and importation of all plastic bags used for commercial and household packaging in order to address harmful impacts to oceans, rivers, lakes, forests, environment as well as human beings and also to relieve pressure on landfills and waste management and for other related matters.”

The bill states that a retailer shall offer a paper bag to the customer at the point of sale.

It describes as an offence: failure to provide customers with paper bags, manufacturing plastic bags for the purpose of selling, and importing plastic bags “whether as a carryout bag or for sale”.

According to the bill, any person found guilty of the offences shall be liable upon conviction to a fine not exceeding N500,000 or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

It also prescribes a fine of N5 million to companies guilty of the offences.

Contributing to the motion on the bill, Tahir Monguno from Borno state said plastic bags have had an adverse effect on Nigeria’s environment.

He said: “Nowadays we have a lot of plastic bags in our water bodies and they are adversely affected. So the bill seeks to regulate plastic bags to reduce the adverse effect on our environment.”

Yusuf Lasun, deputy speaker, however expressed concern that the bill does not provide for recycling.

“There should be room for recycling. Because by this bil, you are simply saying that plastic materials should not be seen anywhere, he said, adding: “And this would mean the need for another amendment. Recycling is still part of cleaning environment.”

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