(Bloomberg) -- On a rainy Sunday afternoon in September, France’s freshly appointed finance minister, Antoine Armand, received a curious welcome gift from his predecessor.
Bruno Le Maire presented 33-year-old Armand, the youngest finance chief in France’s post-war history, with a traditional Basque walking cane. A person’s worth clearly no longer depends on their age, the former minister remarked, but the stick might still come in handy as an aid for climbing mountains and for defending against enemies.
As the inheritor of a massive public deficit who is tasked with crafting unpopular budget cuts to meet EU demands — and with no parliamentary majority to back him — the incoming finance minister will need all the support and weaponry he can get.
“This will help you deal with the many perils on your path,” Le Maire said.
In picking Armand, President Emmanuel Macron has taken a risky bet on youth over experience to face the triple threat of keeping the French economy from falling deeper in the hole, of shoring up France’s weakening influence in the EU, and of salvaging his own legacy as a liberal disruptor who opened up France to business.
Armand will need to tackle sudden gaping holes in public finances that have panicked investors around the world and fueled a costly sell-off in French sovereign bonds. The turbulence has brought humbling relegation for France within the European order, leaving the country with borrowing costs closer to Italy’s than those of safe-haven Germany.
If the challenges posed by the nation’s finances alone weren’t enough, Armand will need to maneuver his way through a volatile political situation as the split of the National Assembly into three feuding blocs hands the far right an unprecedented grip on power. Parliamentary math means far-right leader Marine Le Pen’s lawmakers get to decide how long Armand remains in office as their votes will determine the success or failure of potential no-confidence motions.
Armand wasn’t the president’s or Prime Minister Michel Barnier’s first choice for the job. He only got the call a few days before being officially named and after more senior figures with extensive experience had turned down the post, according to people familiar with the matter.
The Macron loyalist, who has little political clout, doesn’t play down the scale of the job and hopes to maintain the liberal economic line his boss has long championed.
“I chose to go into politics to get results for people’s lives,” Armand says. “Reducing deficits is neither the most popular nor the easiest thing to do, but it’s undoubtedly the most important thing today.”
Armand already made an early misstep. Less than 48 hours into the job, he jeopardized the fragile balance of Barnier’s government by saying in his first radio interview as minister that he would not speak with Le Pen’s party on fiscal matters as the far-right falls outside the “arc républicain,” a grouping of centrist, social democratic and center-right parties that aims to combat populists on both the left and the right.
Le Pen pounced to assert her power following Armand’s comments. Barnier should remind his ministers, she said, of the “philosophy” of the government as some seem to have misunderstood. By 2 p.m., the newly-minted finance minister had issued a humbling statement inviting all parties for talks as prescribed by the prime minister’s strategy.
“The financial and economic situation of France demands broad consultation,” the statement read.
The French far right claimed victory, with deputy Laure Lavalette thanking Barnier on X for this “reframing that was necessary…It would seem that some have not yet fully understood what new world we are living in. We are going to teach you.”
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Armand refuses to comment on the episode. But speaking in Washington on the sidelines of the International Monetary Fund meetings, he says part of his job is to explain to France’s partners that its political establishment is learning the ropes of power-sharing after years of functioning relatively smoothly as cohesive parliamentary majorities supported governments staffed from their own ranks.
“It’s the first time in decades that France has a parliamentary coalition — it’s a completely new situation,” Armand said. “We must adapt to this change in the political landscape.”
His CV reads like the early years of Macron’s own trajectory. Both attended the elite Ecole Nationale d’Administration and started their careers in the General Inspectorate of Finance. Both dabbled in amateur theater before their careers took over, and both came into politics repudiating the left-right divide, stressing the primacy of policy over party positions.
“I’ve always been passionate about politics, in the noble sense of the word,” Armand writes on the bio page of his website. “Not the kind that is focused on labels rather than results.”
When Macron won the election in 2017, Armand was working in the French embassy in Seoul, observing the dynamism of an innovation-driven economy. He only began cutting his teeth in French politics in regional elections in 2021 when he was plunged into a very different world, campaigning in Haute Savoie, near the Swiss border.
Armand may be a relative neophyte, but he feeds off a family heritage of politics and industry shaped by his great grandfather Louis Armand, an officer in the resistance to the Nazi occupation of France who went on to run the SNCF rail network.
Louis Armand is famed for co-authoring a plan in 1959 that prescribed lifting regulatory barriers and boosting competition to spur the French economy. The imperfect application of those ideas has since haunted France’s policymaking elite, and shaped Macron’s own attempts at reform that began with his eponymous 2015 law as economy minister.
Armand junior casts himself as the heir to the mantle. He frames the economic philosophy as being focused on growth and confidence — trusting households and businesses with less bureaucracy and less of a tax burden.
“Confidence in the solidity of our economy and our finances — it’s key to strengthen growth,” Armand says.
The limitations of the approach are now being tested. From the start, Macron had leaned on the promise of lightening regulatory and tax burdens on business and labor to deliver the growth boost needed to sustain France’s expansive welfare state. But the model is misfiring as an unexpected slump in tax revenues and growing demands for public outlays have driven the budget deficit to 6.1% of economic output this year.
Next year’s budget is forcing Armand and Macron into uncomfortable U-turns on their core economic philosophy as the government is forced into emergency tax hikes, more than reversing some of the cuts since 2017 for some corporations. The government defends the choices, saying the increased tax burden is only temporary and will weigh solely on the wealthiest individuals and biggest companies, while most of the €60 billion ($65 billion) effort will come from spending cuts.
“I’d rather not have to raise taxes, even temporarily, even in a targeted way,” Armand says. “But we need to get the budget deficit under 5% in 2025. This isn’t a whim of the finance minister or an administrative dogma, it’s a milestone that’s essential to succeed in our financial trajectory.”
Economists are skeptical. French economic think-tank OFCE expects the austerity of the budget plans to knock 0.8 percentage points off growth, while the country’s own fiscal watchdog the HCFP warns the entire 2025 plan is “fragile” because an overoptimistic macroeconomic assumption.
As Armand arrived in Washington for the IMF’s meetings on Wednesday, the institution also sounded a note of caution. According to its analysis, without any action France’s deficit will still be close to 6% in 2029 — far above the 2.8% Armand has pledged by the same time.
Washington plunged Armand in at the deep end of international economics as he had a string of bilateral with the chiefs of the IMF and the World Bank. In a meeting with Janet Yellen, the finely-tuned technocrat showed his training, exhuming confidence as he spoke competently and faultlessly in English with no notes, holding the gaze of his counterpart.
But as he was preparing to leave, Moody’s announced that it had cut France’s outlook to negative. That’s the third adverse assessment since Armand took office a little more than a month ago, following the same move from Fitch and a downgrade at Scope.
A political verdict on Macron’s bet on Armand will take longer, but early signs point to trouble ahead as opposition parties fire warning shots.
The budget is “the Bercy technocrats’ museum of horrors,” said Jean-Philippe Tanguy, far-right lawmaker on the National Assembly’s finance committee as it reviewed the draft proposals. “Tax injustices are everywhere to be seen and deplored...Nothing will have changed with the elections — the Macronist ministers follow one another and their mismanagement looks the same.”
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