The first ever primaries organized by the right wing parties in France concluded with an astonishing surprise: Former Prime Minister Fillon, a seasoned but discreet politician and fan of Le Mans car endurance racing, emerged as a clear winner, ending Nicolas Sarkozy’s career in the first round and beating longtime favorite Alain Juppé with a fantastic acceleration in the last lap, to reach 66.5% of the votes in the second round. What’s next on the political agenda and who is François Fillon? Read more in the first of a series of analysis covering all the milestones of this fascinating campaign to the French Presidency, due to conclude by mid-2017. Brunswick Paris office: www.brunswickgroup.com/contact-us/paris/

1. Episode1–Therightwingprimaries
France2017elections
inperspective
November 28, 2016

2. The firsteverprimaries
organizedby the right
wingpartiesin France
concludedwithan
astonishingsurprise:
Former PrimeMinister
Fillon, a seasonedbut
discreetpoliticianandfan
of Le Manscar endurance
racing,emergedas a clear
winner,endingNicolas
Sarkozy’scareerin the
firstround andbeating
longtimefavoriteAlain
Juppéwitha fantastic
accelerationin the lastlap,
to reach66.5%of the votes
in the secondround.
What comes next?
This isjust thebeginning and theroad
to thePresidency islong. The left
parties are reconsidering their options
now thattheir key opponent is
identified. François Hollande will most
likely run, although hewould first need
to win theupcoming primaries within
theSocialist party. Some are saying
thatheis seeing François Fillon asan
easier opponent: a more conservative
right representative, less center-
compatible and hence more
vulnerable. Butis it true?Who is
François Fillon, theodd man outno
one had expected to win? Ahard
Thatcherite in disguise, asmany media
commentators haverushed to
conclude, or more of aChristian
democrat open to social dialogue?
Difficult to say yet.Whatwe know is
thatFrançois Fillon hasan ambition
and a very detailed “shock” program,
and is not theundecided “Mr. Nobody”
Sarkozy usedto describe.
Who is François Fillon?
François Fillon, 62, isa long standing
politician, with four decades of political
experience. Elected astheyoungest MP
in 1981 after Mitterrand’s election
when hewas 27, hehasheld officesat
all levels of thepolitical landscape,
several times asMinister (incl. Labor
and Education) until hisappointment
asSarkozy’s Prime Minister (2007-
2012).
Close to thecenter right-wing, heholds
afree-market and pro-business stance,
and hasbuilt areputation for being a
cautiousbut determined reformer
(conducted two pension reforms). Of
claimed catholic faith and culture, heis
amoderate European (hevoted
against theMaastricht Treaty) and
embraces atraditional stance on social
issues. Discreet and scandal-free, his
style contrasts with that of the
extrovert and buoyant Sarkozy.
François Fillon, the
odd man out: the
challenger candidate
has unexpectedly
emerged as the
winner of the right-
wing primaries. He
advocates for a
profound reform of
the French economy
and a pragmatic
foreign affairs policy.

3. © Brunswick 2016 | 3
Brunswick Group
France 2017 elections in perspective
Fillon’s program has been
fine-tuned for months and
covers a wide spectrum of
topics.
At thecore of hisprogram is hispledge
to repair theFrench economy, whichis
currently burdened by sluggish
growth, an unemployment rate stalled
at 10% and public debt thatis nearing
100% of GDP. Thevision behind his
program is hisalarmist diagnosis of the
French economy, which hedescribed
back in 2007 as being in a situation of
“bankruptcy”.
State reform: mission
impossible?
Inorder to restore France’s public
finances and structural growth, Fillon’s
ambition isto achieve adeep and
radical Statereform.
Withregards to balancing thebudget,
headvocates for areduction in the
public debt level, from 100% today to
95% in 2022. To do so,heproposes a
cutof 100 billion euros in thepublic
expenditures over thenext 5 years.
This would undermine the“welfare
state” in acountry known for having
one of thehighest levels of public
expenditures (57% of GDP).
His flagship proposal is to cut 500,000
public jobs within 5 years
(representing roughly a10% cut),both
at government and local level, paired
with an increase of working hours for
civil servants (from 35 to 39-hour
week). In addition, healso wants to
align thepension statusof public sector
workers with thatof private sector
workers and to pushback the
retirement age from 62 to 65 years old.
Economy: a
pro-business stance
With“liberation of theeconomy” at the
top of hisprogram, Fillon advocates for
aprofound change of thebusiness
environment based on increased labor
market flexibility and significant tax
breaks for companies.
His key measure to trigger a“shock of
competitiveness” is to end France’s
emblematic 35-hour work week,
leaving private sector companies free
to negotiate working hours with their
employees– within theEUlimit of 48
hoursper week.
From a tax perspective, Fillon has
committed to a reduction of business
taxation by as muchas €50bn starting
in January 2018. Thisincludes cutsin
corporate charges on wages (40bn €)
and a lowering of thecorporate tax
rate (10bn€) from its current level –
33.3% – to around 25%, a rate thatis
much closer to theEUaverage. A
progressive increase in theVAT by two
base points would be key to financing
thesetax allowances. Inaddition, the
French “ISF”, or “Solidarity Tax on
Wealth,” would be scrapped in order to
encourage investments in SMEs.
He is betting that by focusing on
businesses rather thanhouseholdsand
pushing through corporate tax relief he
will boost theeconomy in thefirst two
years of hismandate.
Foreign policy:a mix of
stronger sovereignty
and smarter EU
integration?
Fillon hasnotbeen very forthcoming
on foreign policy so far, ashehasput
an emphasis on national issues.
However hehasgiven afew vigorous
views on some key international
issues:
 Defendinga “Europeof nations to
ensuresovereignty”:Fillondoesnot
want more integrationat large in
Europeand believesthatthe powers
of the EuropeanCouncilshould be
increasedvs.the European
Commission.Still,he considers that
the Eurozoneshouldbe strengthened
by creatingan “economicgoverning
body”,firstat the level of the
Eurogroupand then at the Headsof
State level.Regardingthe immigration
issue,Fillonisin favorof launchinga
“Schengen of Justice”negotiationwith
EU partnersto harmonizerulesof
eviction, aswell as reinforcingcontrols
at EU bordersand strengthening
accessconditionsto socialwelfareand
finally amplifyingsupportto
neighbouringnon-EU countries.
 ReinforcingtheFranco-German
couple in order to revitalize
Europe: In many respects, the
Europeangovernancevision
championedby FrançoisFillonis close
to thatof the German Ministerof
Finance,Wolfgang Schäuble:
prioritizingbudgetaryand fiscal
reformsand the reform of
intergovernmental governance. He
believesthatthe revival of theFranco-
German relationshipdependson
France’sabilityto reform itselfand
thereforeto regain economic
credibilitybefore itsGerman partner.
 Taking a pro-Putinstance and
seeingChina as “the major threat”:
Fillonadvocatesfor a pragmatic
approach and dialoguewith Russia
whichhe believesis the onlyway to
put an end to the war in Syria and
defeatISIS. For him,isolatingRussia
not only couldbe damagingfor the
Frenchinterestsbut alsoputat risk
global balance.By contrast,Fillonhas
a much strongerstanceagainstChina:
he believesthere should beclearer
rulesof reciprocitybetween China and
Europein terms of commercial
exchanges.
Ashock therapy
program

4. What’s next for him?
Fillon will haveto
overcomethreekey
obstacleson hisway to the
Presidentialelection:
 Gather support for implementing
such radical reforms in a country
that has a strong resistanceto
structural change. Everyoneknows
how difficult itis to conduct reformsin
France,where socialconservatismcan
impede any kindof political ambition.
However Fillonhasa key asset:he has
gained respectfrom the unionsfor his
ability tonegotiateand maintaina
dialogue, evenon the most
controversial topics, suchas the
retirement schemes.Howeverthe
State reform he proposeswould
inevitablytrigger socialconflictssohe
wouldeitherhaveto be less
consultativethanhisusual styleor be
preparedfor more compromises.
 Demonstratethat thesereforms are
realisticfrom a financialpoint a
view. Accordingto a number of
observers,Fillon’s programmeis risky
from a public financepointof view,as
he advocates formassivetax
reductionswhichare insufficiently
funded.As a consequence,France’s
deficit couldrise to up to 4.7%of GDP
in 2017vs.3.3%expectedin 2016.
 Prove that he is the man capable of
reformingthe country,while
opponentsand othercandidatespoint
outthatduring histerm as Prime
Ministerunder Sarkozy’s mandate,he
didlittleto reform the French
economy.To demonstratehow
determined he is,Fillonhas
announcedthatkey reformswouldbe
swiftly implementedduring the first
100days.Potentialkey ministers
wouldalso bedesignatedbefore the
end of 2016sothattheir offices are
operationaland readyto deploythe
reformsasof May2017.
What’s next on the
politicalagenda?
The battleof the elections
hasa long wayto go, with
stilla lot of uncertainties.
Against Fillon, thenew clear candidate
of theright wing opposition for the
presidential elections next spring,
there will bea threefold opposition,
from theleft wing, from theextreme
right, as well as from thecenter.
Ontheleft,theoutcome of the
primaries for the Socialist party and its
allies, which will take place in January
2017, is highly uncertain atthe
moment, with François Hollande and
hisPrime Minister Valls both being
potential candidates. Shouldthis
happen, thePM’s could resign in the
short term. Whatever theoutcome is,it
is already clear thattheleft wing
current majority will also be
challenged by other candidates coming
from theextreme left and theGreen
party.
At thecenter, François Bayrou, who
was astrong supporter of Alain Juppé
during theprimaries, hasalready
underlined thathedisagrees with both
thevaluesand themethod proposed
by Fillon and, as aconsequence, might
decide to support adifferent candidate
or run himself for themandate. Lastly,
Emmanuel Macron, Francois
Hollande’s former Minister for the
Economy, hasannounced his
candidacy and could play asignificant
role, as heclaims to be neither from the
left nor theright.
Ontheextreme right, at theheart of all
discussions, is thequestion of which
candidate will faceMarine Le Pen in
the2nd round of thepresidential
elections, as thecandidate oftheFront
National is expected by most
commentators to qualify.

5. © Brunswick 2016 | 5
Brunswick Group
France 2017 elections in perspective
The President of the French
Republic is elected directly by the
French citizens for a 5-year mandate. If
heor shegathers over 50% of votes, he
or sheis immediately elected after the
first round. Otherwise, thetwo
candidates who havegathered the
most voteson thefirst round move into
thesecond round.
Upcoming electoral milestones
November 2016: right
wing primaries
January 2017: left-
wing primaries (excl.
extreme left)
End of February:
begining of the
Parliament recess
April 23, 2017 and
May 7, 2017:
Presidential election
(2 rounds)
Mid May 2017:
Appointment of the
Government
June 11 and 18, 2017:
General elections
(members of the
Lower House of
Parliament)
September 24,
2017: renewal
of half of the
Senate (Upper
House of the
Parliament)
J-LMélenchon
Far-left, populist
Y.Jadot
Green, Member
oftheEuropean
Parliament
A.Montebourg
Former
Economymin.
(2012-13)
M.Valls
Social-liberal
Current PM
(since 2014)
F.Hollande
Current President
(since 2012)
E.Macron
Youngreformer
FormerEconomy min.
(2014-16)
F.Bayrou
Centrist
Formermin.
F.Fillon
Right-wing
candidate
FormerPM
(2007-12)
M.LePen
Far-right,
populist
Main candidates (declared or probable)
?
?
?
Getting a majority in Parliament is
the next key question. Indeed, one
needs to remember thatimmediately
after thePresidential election (two
rounds on April 23rd and May7th), the
elections for theLower House of the
Parliament (Assemblée nationale) will
be organized (two more rounds on
June 11th and 18th) and will either
confirm a truemandate for thenewly
elected President by giving him afull
majority or restricting hispower with a
narrow majority, or in theworst case
scenario, no majority at all.

6. Brunswick Group
France 2017 elections in perspective
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