Hello, and welcome to Stephanomics, the podcast that brings the global economy to you. O Macron is super contagious. Any primary school teacher can tell you that. But it's not as lethal as previous rounds of this virus, so surely it's going to be a lot less damaging to the recovery. Only you don't need to be in lockdown for a significant chunk of the economy to grind to a halt. You just need one in four workers to call in sick.
Today's show we Haven't on the ground report from Bloomberg senior correspondent Shawn Donnan on the tidal wave of sick days that's hitting the supply of mozzarella sticks, airline pilots, and yoga pats. We also take some time to consider President Emmanuel Makhorn, labeled the anti Trump when he swept to power in France nearly five years ago. Now looking a bit battle weary as he fights for reelection, but
things are going surprisingly well for the French economy. I have a conversation with the French finance Minister, Bruno Lemaire in a few minutes. Hang on for that, but first, for much of this pandemic It's fair to say that governments have had more than a little control over both the economic accelerator and of course the breaks. But with the O Macron variant running rampant in many major economies, we're seeing a new factor that governments seem to have
a lot less control overcome into play. Workers calling in sick. It's hard to overstate how fast the O Macron virus has hit the United States. It took the US ten months to register its first ten million cases. In the last ten million cases, which in early January took the US through the sixty million case mark, have come in less than a month. That speed has had consequences for businesses that have been very different than what they saw
at other times in the pen demic. Here's James Bill, the CEO of Leto Pizza, a chain that has a hundred and ten locations in the Washington, d c. Area. Now it's almost kind of like we're resetting the clock again. Our our new normal is becoming another new normal. It seems like it's also not just the pizza chains workers calling in sick. Beal says he's been dealing with another round of problems with his suppliers, their staff, problems have
seen them reduce production shifts and delivery routes. To put that in real world restaurant menu terms, that means he can't get as many mozzarella sticks as he would like, and it takes longer to get them. It's happening pre Amicron, but his has gotten Deviline has got worse. Tell me, tell me how how you guys have been hit by, particularly this latest wave here. I think this latest wave is just I think hit A lot of people are
sort of on certainty. I think that's the biggest Jim Robertson, who with a partner owns and operates five Leado franchises and the DC area sas. So far, the supply chain problems haven't hit the pizzas, although a few times recently he has had to make the two hour there and back drive to a Virginia warehouse to pick up pizza boxes that haven't arrived in time from suppliers like in boxes one day, and then you're trying to find containers for the wings the next day, and then if you're
out of moth through all the sticks. So it's just but I guess I think understand it. And so as long as you explain things to people, I think you're okay. It's just the core items. You get nervous. You don't want to run out of anything we do to make the pizza right. You know, It's one thing if you're out a moth through all the sticks and you won't hear me company. But if I'm at a you know, you know, making be not being able to make the pizza sauce or being able to make dough, then you've
got a big problem. The problem for the US economy is, of course, that it's not just a problem affecting the supply of deep fried cheese. What started as a series of holiday flight cancelations as pilots and other staff fell ill or were forced into quarantine, it's rapidly becoming a business reality, and factories, hospitals, grocery stores, and at those ports where the container bottlenecks were building up last year.
Even if the hit is temporary, as most anticipate, the disruptions enclosures are likely to slow the fragile rebound in some sectors and way on businesses plans for the future. Nick Bunker, an economist at job Site, indeed, grew up in Massachusetts and there everyone remembers the Great Blizzard of seventy eight, which dumped as much as four ft of snow on parts of New England inside thirty six hours
in February. It paralyzed the region for weeks. It was a major economic hit in the short term, which is what he thinks oh maicron will do. Only it has quickly become a national event, which means for now thinking about the economic impact as the mother of all winter storms, this big we a very large, sharp shock to the economy in the lade market specifically. But the hope is, like a storm, it ends and then there's return to prior trends. The impact may also be partly hidden in
the data. Of course. The monthly job numbers in the US and elsewhere are really best at estimating who has been fired or hired in any given month. They're not as good at telling the story of lost economic output due to people calling in sick. And yet there's clearly evidence of exactly that. Alaska Airlines has already canceled ten percent of its flights in the month of January, citing
an unprecedented number of staff calling in sick. Lulu Lemon, the leisureware company, warned this week that it had been forced to reduce operating hours that its stores because of lack of staff, which means fewer yoga pants sold and lower profits. In California, out breaks of hit luxury retailers on Rodeo Drive. Supermarkets are blaming oh Macron Absences for contributing to shortages of everything from chicken breasts to organic tofu.
They've also hit the ports, which is daunting for anyone who was paying attention to the supply chain crisis we all lived and breathed last year. Jim McKenna is president of the Pacific Maritime Association. They negotiate labor agreements for seventy companies at twenty nine ports on the West coast
of the United States. Well, we've seen over the last couple of weeks is the virus go from two to three a day to twenty a day, and now we're doing over a hundred positive tests per day, and in fact, on Wednesday we had a hundred and sixty longshoreman test positive. There is good news, of course, when workers do have to stay homesick, they often aren't out for as long as they were with other variants, especially if they are vaccinated.
Jim Robertson's Leado franchises haven't been hit hard yet. He had three employees at one store test positive, but he's been able to keep running. And while there weren't many people eating lunch in the dining room of one of his stores on a visit earlier this week, it wasn't entirely dead. Is it changing how you're thinking about the business or what your strategy at all, or how your protecting or do you think they're going to go back to a world where I'm We've got people here eat
much right now. But yeah, but so when we would normally have this restaurant would be full in old days at on a even on a Tuesday, and at mean would at least be three quarters getting ready to fill up because it's a small dining room. But you definitely have rethought on a monthly basis what you're gonna do to generate more carry out business, how to make it more efficient. You know, we now have curb side. We
used to not have. We have um you know, during the height of the COVID we would you know, we had it all carry out at that point. We found ways to streamline things, open a door to make guests for it feel more comfortable. It's really just how we make our guests experience the best that can beat through this. Back in the kitchen, there were Manzelli sticks going in the deep fryer next to a cauldron of mariniri sauce.
All of the staff were masked, but they were there and working, even if one of the printers that buzzed into action every so often was playing up, which is emblematic of a broader story of adaptation. Lito Pizza was facing staff shortages before oh Macron. The company now employs fewer people than it did before the pandemic. To adapt, Beale says they have quietly cut the choices customers have
for their pizzas. They've also dropped complicated pasta items from the menu to take some of the pressure off kitchen staff. So as to planning ahead, and one thing we try to do is embrace the technology to see where we can reduce pain points as far as the labor So prior to COVID, we did three percent online ordering, a digital ordering. Now we're up to about thirty digital lording. So that actually and that's in a you know, eighteen month time frame, so that actually enables us to do
a greater volume with loss people. In economic terms, that of course means they're increasing productivity. That's good for business, but that doesn't diminish the hit. The virus is the economy, and he keeps finding ways to surprise us, which is why millions of us are calling in sick for Bloomberg News.
I'm Sean Donnon now France and the story of Emmanuel Macorn when he came out of nowhere to win the presidency in seventeen, just a few months after President Trump entered the Oval office, mcral was dubbed the great Liberal Hope, a supporter of multinationalism, rules, liberal values, free markets, everything you might say the President Trump was not. He was going to transform the French economy, lead the European Union to bigger and better things, oh and fixed climate change.
Now it's five years on and he's facing the fight of his life to be re elected in April against some right wing opponents who are forcing him onto difficult political territory. But he does have one ace up his sleeve that eluded past French presidents, a strong economy. In a minute, We're very lucky to have a chat with the French finance minister Bruno Amaire. But first a few words with our France economy reporter Will Horribon. Will thanks very much, and I should thank you for for helping
us get that interview with Bruno Lemaire. Just get us up to speed. For those who haven't been watching the twists and turns of the French presidential election, where do we stand? Well? In some ways the French presidential election hasn't really got going yet because COVID is very much gone in the God in the way. But what we see happening is the Macron is he has still has quite a lead in the polls um and the people who are close closest behind him are those to the
right of where he's set himself out. Now. The way the French elections works, important to have a reminder is it's a two round process, so that two candidates who get the most votes in the first round go to a second round run off. So most poles are showing now that Macron will go to a run off against one of one of three candidates from his right, and and those are There's there's Barry Press, who's a sort
of center right candidate from Lepic party. There is his perennial, the perennial nationalist candidate in French elections, Marine Lapin Lpin is always a surname of the perennials, the surname here, but this would be if if she went to the run off, that would be a repeat of twenty seventeen
for Macron as well. And then there is a new far Candida as well, who's a sort of former polemicist, journalist, commentator Eric m. And you you mentioned that it does introduce this kind of interesting dynamic, the fact that you have the two rounds. So so where do the polls stand. Well, Macron does have quite a good lead, and you know he's around let's say, in the first round, and then the three other candidates are often around neck and neck,
about seven or eight points behind him. So it seems quite clear that he will at the moment, if you if the polls are correct, that he will get to the second round relatively easily, and then he will have to in the second round. It's very different if he faces valet becles from the center right who perhaps have similar economic program to him, or whether he faces one of the more controversial candidates in Marine le Pen. Thinking
about that second round. You know, it's all very well if you if you win the first round, but if all of the right candidates together add up to considerably more at the moment, considerably more than you know, you have a bit more of a risk if you have a candidate that's going to unite all of those all of those voters. So what's the what's the prospects for that? Again, it depends who it is. I think you know that some people who voted for Zamore could vote for say
l Pen in the second round. Some people who voted for the Pen in the second round in first round could vote for in the second or even the other way around. It's very hard to predict that at the moment. And another big important factor in this is absenteerism. Will will people not actually just not bother voting in the second round? Um, And that makes it very hard to
predict as well. We've said at the start that the economy is quite strong, and we gather you've written that his advisers are saying, you know, don't necessary you know, don't spend all this time talking about immigrants and and other difficult issues. You know, go to your strong suit, which is the economy is that put at risk by by Omicron or does he is that a really strong card for him. It could be a strong card depending
on the timing. Right now, the French economy has recovered very well from the pandemic um and sort of noticeably better than some of its European peers, and so that is definitely an asset for him if that continues in the next couple of months. Um there are some very strong employment numbers that I think not even not even his team expected to see at the end of by
the end of this year. And also, as we talked about in the story that we've written, the so he can point to some of the early reforms that you've mentioned in in your introduction as being part of the reason why some of these some of these positive economic results are coming through now. Um. So, depending how he plays it, and if if the pandemic comes off the boil to a stain extent in the next few weeks, then it could be the card that could be very
useful for him going into this election. Well, thanks to you and your excellent contacts at the French Finance Ministry, we can hear a lot more about that now in my conversation I had with the Finance Mr Puno Lamaire. But thanks very much, well, thank you Stephanie. We're delighted to have the French Finance Ministra back with us. Welcome
back to Stephanomics, Ms leminist Thank you. We obviously are many people listening to this podcast are in America and in other places, and many of the stories we see coming out of France in the run up to this presidential election have been about immigration, security and of course the pandemic. But President Macon came to office five years ago on a platform of nomic change. We were going to see a wave of supply side reforms that would end decades of relative economic decline for France. So do
you think that macronomics has succeeded? What's happened to that agenda? I think that maccon has been successful in restoring the French economy and in making the French economy more competitive. And the promise that he made in twenty seventeen was to introduce a total of the whole of the French taxasion system, of the French competitiveness for the sake of having more jobs and more growth. And here we are.
We have more growth with the level of six goals for one, and we have restored the pre crisis activity level no later than November of last year. And as far as employment is concerned, we have the highest employment rate in fifty years, sixty seven point five for the fifteen to sixty or four years old. So I really want to in see on the fact that the economic policies that have been introduced by Quison backron is a success, success for France and a success for the French people.
You're right that employment is stronger than it has been in a while, but unemployment still much higher than in Germany. And if you look at the forecast of our economists of other economists, they don't seem to expect higher long term growth rates in France as a result of any of these policies. So so in that sense, macronomics has
does not seem to have had an impact. Now I show your point of your the necessity to reinforce those results, but I would like to underline that we have a very sound and solid basis to reinforce the French economy and to make better over the next years. The level of corporate stacks was thirty three point three in twenty seventeen and we reduce that level to twent for all companies in tw two. We also have very positive results on the creation of private companies and on the scalp
of our startups. So I think that there is a need to continue reducing the level of taxation on private companies. I think that we have to reduce the level of social charges on the highest wages if we want to be more competitive for the technological industries. And we also have to think about the best way of improving the skills of the French workers. But my point is we are on the right track. We did the necessary reforms.
There is a need to do more, there is a need to do better, but we are on the right track by improving the French offer, which was to meet the key point in the French echomy. You have talked about the energy price rise that the whole of Europe is seeing as an absolute emergency. Clearly it's a massive issue in the UK and other places. Households are bracing themselves for maybe fifty increases in their energy bills in
April in the UK. France has made this what's from the outside an extraordinary commitment to cap the impact on households this year to only a four percent rise. You're the finance Mr. Can you really afford that to write that blank check to French households and who's who's going
to pay for it? In the end, It's an absolute necessity and I think that we would have to share the cost of course between the French state and we are already being eight billion yours to reduce the level of the energy prices, the electricity prices for both the households and the private companies, and we will need to do more because increase on energy prices. The increase on electricity prices might reach thirty five to for the year
twenty twenty two. So there is an absolute necessity to intervene if we do not want to have very strong difficulties for the households and a threat on the private companies, especially on the industrial companies. So we have decided first of all to reduce the level of taxation on electricity prices. This is the first response that we have given with the Prime Minister to the increase on electricity prices. But
it won't be enough. So we are working very closely with a d F electricity refunds to try to build a second response. We will which will complement the first one and which will allow us to stick to the promise given by present Macon to cap the executive prices to four in twenty two. I hope that we would find the response, that we would be able to proposal response no lager than the end of this week. And do you see that as an economic necessity or a
political necessity? Because I look around Europe and there's the same kind of energy price prices coming down the track for many governments, and no government, no other major government, is offering this kind of support, but they're not just
about to face a presidential election. This, first of all, in economic necessity because it is less costly to protect the industrial plans from this huge increase of the executive prices, rather than providing help to the salaries, providing help to those companies because they are threatened by possibly shut down. I really think that this is the right response, the
right economic response to this electricity crisis. I also want to insist on the necessity to have a long term approach, which won't be enough to have a protection given by boast of French state and by a deaf We also need to have a long term response based on changes in the electricity market, the European electricity market, because I think that they need for changes in the European electricity market. It will be also the core of the French EU presidency.
What is your advice to to other governments who are all dealing with the same issue and they can also see what the potential cost could be of putting the bill for these energy price rises. I think that may be why they are willing to have households really shoulder the burden over the next year. What do you think of the risk of that you let households face this kind of maybe thirty forty increase in their energy bills.
First of all, I really think that there is no possibility for our people to have such an increase in their electricity bills thirty when the average electricity bill in France is around nine euros. That's something that the all the people cannot afford, and that's why there is a need for a strong response. Then I really think that the single, fair and efficient response over the long term is based on one single word. Independence. We need to
be more independent on the production of energy. We need to reduce the level of dependency on gas production by Russia and by other foreign states, which means that we have to build both new nuclear plants. That's the response that we wanted to give. We put on back home to the risk of these increasing energy prices, and we also have to rely on renewable energies. But the real response is to have more independence on the energy production
everywhere in Europe. Do you think as we look at the fallout, the longer term fallout from the pandemic, the one that is most obvious clearly is inflation, and not just energy prices, but inflation that's come from supply chain issues and potentially also the labor market being quite tight in many places, people changing their attitude to work in some countries. Do you think inflation could end up as a greater political risk to governments than the pandemic itself.
We have to be vigilant. We have to understand what is behind this increase on prices, and I think that what is behind and what explains half of the increase of prices is the energy prices, and that's why the long term response must be based on more independence on energy production, and then we need to be very careful, very vigilant on inflation or assessment remains that this level of inflation remains a temporary inflation. But let's be very clear.
When I'm speaking about temporary inflation, I'm not speaking about days. I'm not speaking about weeks. I'm speaking about months. And I think that we would have to leave with a pretty high level of inflation by the end of twenty twenty two, because of the lack of energy, because of the difficulties in the supply chains, because of the situation
in China, which has decided to close its borders. For all these reasons, I think that we would have to leave with a pretty high level of inflation by the end of twenty twenty two. So this is a temporary inflation. But we have to understand that the word temporary means some month and not some weeks. We have different definitions of transient in the US, and people are certainly changing
their view of that. If we step back a little bit, you will remember, you will certainly know five years ago, people around the world so President Maquon as Europe's great liberal hope. He seemed to be this new, very confident blend of the best liberal instincts from the right and the left of French politics European politics. But now we look at the presidential campaign, he's he's polling only just ahead of two extreme right candidates, one of which we
didn't even know about a few months ago. Is the conclusion the rest of the world to draw that that middle road that President mcrow was walking is impossible in today's climate, just can't be done. No. I think, on the contrary, that he um is the evidence that there is a path for shuctule reforms, for the improvement of the competitiveness of an economy and for the possibility of
giving to every citizens the chance of being successful. Of course, we are facing a very stronger position from the extremist parties, but that's the case everywhere in the Western world. It has been the case in the United States, it has been the case in Italy, it has been the case in the UK. So it is the case in every Western country. But the true is that there is a
possibility for this way to be successful. And I'm deeply convinced that at the next president short election in France, Emma will be successful because he has given the evidence that if we are taking the right economic decisions, we can get some very strong wizards. Once again, we are on the right pass We should stick to that path
because it gives results to the French population. But just to push back a little bit, those two extreme right candidates are polling between them significantly more than President mcrow, And when one looks at the stories and the language from the presidential campaign, it feels like his his response, his political response in order to win the election, has been to move away from his liberal instincts and to play up perhaps two or of the the illiberal or
the anti immigration side of French politics. So um, again, from the outside, that seems like quite a dispiriting development that the only way he can succeed is actually by moving away from the liberal vision that he had outlined. It depends on what you mean by a liberal revision. If a liberal revision means to believe in the possibility for every citizen to build its own success, which is I think at the core of the poltical liberalism, I
could share that point of view. If you mean by a liberal approach the fact that there is no need for the state to intervene in the economy, I would not share this point of view because the crisis just proved one single thing. We need the intervention of the French state or of the urban states to as the consequences of the crisis. And if we have been successful in twenty one to face the crisis, to protect the companies and to protect the workers, and also to have
a very quick and sound economic we bond. That's because the states and the public powers decided to intervene and to give very strong responses to the crisis. It was not the case in twenty eight and in twenty tendering the financial crisis, and we were not successful during the
last financial crisis. We have drawn the lessons of these financial crisis by asking the French state and by asking the Upan states to intervene on the market to protect the companies and to protect the salaries, and it proved to be more efficient. It does not mean that I think that the state would have to intervene in every situation and under every circumstances. It just means that in a period of economic crisis, we need the intervention of state and we need to support other states. We did
speak several years ago. You have managed to be Finance Minister through the whole of President mcross presidency, which is not is quite a rare thing in France. I gather, do you want to stay in your job if you get the chance, or is there a better job in government that you would like. There is no better job than being finance minister. And I will just finished by insisting on the necessity of having more stability in French politics.
You know, when we are talking about economy, about finance, about coming back to some public finances, about the necessity of having more industry in France, it takes time. And the lesson that I draw from these five years as a French finance minister is that if you want to build something solid for the French nation and for the French people, you need time. Time is of the essence. If you want to be successful, you need more stebility
into French politics. Bruno Lamaire, thank you very much, Thank you so much. That's it for Stephonomics. We'll be back next week. But for more news from Bloomberg Economics, do follow us Economics on Twitter and maybe check out my cover story for this week's Business Week on the year ahead for the global economy. This episode was produced by Magnus Henrickson, with special thanks to Sean Donnan, will Horribin
and the French finance Minister Bruno Lamaire. Mike Sasso is executive producer of Stephonomics and the head of Bloomberg podcast is Francesca Leap