Emmanuel Macron may govern France for another five years, but faces economic challenges.

Just like in Germany, the Ukraine war is leaving its mark.

According to the International Monetary Fund, the French economy will grow by less than 3 percent this year - last year it was 7 percent.

Henrik Kafsack

Business correspondent in Brussels.

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Niklas Zaboji

Economic correspondent in Paris

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This depresses business sentiment, puts a strain on the labor market and restricts the state's fiscal policy leeway.

At the same time, populists from left and right were very popular in the presidential election.

Inflation is galloping, and according to surveys, concerns about purchasing power have been a key concern for the French for months.

Macron will therefore hardly be able to avoid linking economic policy reforms with social benefits.

This can be seen, for example, in pension policy.

During the election campaign, Macron made it clear that he was risking a new attempt at reform in his second term.

Before the corona pandemic, this had failed, not least because of the bitter resistance of the trade unions.

There is still resistance, and surveys indicate that more than 70 percent of the population reject the reform, which is why the project is considered ambitious.

The plan is to standardize the complicated network of more than three dozen pension funds, to abolish special regulations for state-owned companies such as the energy company EDF and to gradually increase the retirement age to 65.

The current average age is less than 61 years.

According to the OECD, this is significantly lower than in comparable countries.

No information on the schedule yet

The economic advantages of a higher retirement age: Employees would pay longer into the fund and receive shorter payments.

"The need to reform the pension system is obvious," says Armin Steinbach, Professor of Law and Taxes at the HEC Paris School of Economics.

France benefits from comparatively high birth rates, which somewhat dampens the demographic problem.

But the burden on public budgets increased steadily.

However, Steinbach is not optimistic.

"It will result in some kind of soft reform," he says, referring to the resistance from left and right.

Macron has clearly shown a willingness to compromise.

Of course, he has to do that if he is dependent on the approval of the opposition after the parliamentary elections in June.

"Pension reform, an important task in Macron's second five-year term, will be carried out in consultation with the unions and employers," said Labor Minister Élisabeth Borne on French radio on Monday morning.

At the same time, she emphasized that "those who started working earlier will continue to retire earlier".

This also applies to employees in physically demanding jobs.

In addition, Macron wants to accommodate his opponents by raising the minimum monthly pension from 980 to 1100 euros.

He has not yet given any information on the timetable for the reform project.