France: Protests won’t derail the economy

We do not expect French pension reform protests to have a lasting impact on the economy, as the likely small downward revision to Q2 will be offset by stronger growth over the rest of the year.

What you will learn:

• As matters may turn bitter, we have assessed more dire outcomes. There’s a chance tensions become stronger and last longer. In that case, the scenario will have a larger impact on activity and would probably lead to a government reshuffle to calm tensions while maintaining the pension bill.
• Finally, while less likely, a worst-case scenario would see prolonged, hostile protests that cannot be appeased by a government reshuffling, forcing the text to be withdrawn. Market reaction then would be greater, possibly causing a permanent shift in French sovereign rates as investors see the bill as essential for public finances sustainability and for increasing France’s growth potential.