Macron's political crisis hurts business morale ahead of Paris Olympics

PARIS - As President Emmanuel Macron welcomes business leaders including Elon Musk to Paris ahead of Friday's Olympic opening ceremony, there are early signs France's political deadlock is hurting business sentiment and affecting corporate decision making.

Data released by the country's statistics office on Thursday showed French industry morale unexpectedly slumped in July, after a snap legislative vote called by Macron left France in the hands of a caretaker government as it hosts the world's largest sporting event amid heightened security fears.

Macron said this week that his outgoing government will remain in place until after the Games, when he will seek to name a prime minister. He has rejected the candidate proposed by a leftist alliance, urging a broader coalition.

Tesla's Musk and LVMH boss Bernard Arnault are among CEOs lunching with Macron on Thursday at an investment summit.

The heads of Coca-Cola, Samsung, TikTok and others will also be present, while more than 100 heads of state will attend the Olympic opening ceremony along the Seine river.

A Macron adviser told reporters last week that the president will use the summit to assuage fears about the political crisis.

"Of course, this event will be a bit special, after the political events of the past few weeks. The goal will be mainly to explain to foreign chief executives the choices made by the president, the dissolution (of parliament) in particular," the adviser said.

"For foreign investors, what matters is the policy that's been carried out, continuity and stability, providing certainty. And the president will seek to reassure the CEOs attending about the choices he made."

Macron has defended his decision to dissolve parliament after a thumping by the far-right in European Parliament elections in June, even though the resulting vote left France in a state of parliamentary deadlock after no party won a majority.

PLANS ALTERED

After reporting a second-quarter sales miss on Tuesday, LVMH CFO Jean-Jacques Guiony said "political and taxation uncertainties in France" had affected its share buy back plans.

"The existing or preceding government has been talking about attacks on the buy back of shares. The future government, nobody knows what they will have in mind. So in the meantime, it's wise not to do anything," he told investors.

Laurent Favre, CEO of French car parts supplier Opmobility, said manufacturers like stability, adding: "When we change policy every three minutes, it is never good.

"For industry, the lack of visibility means stress and effectively, no investment," he said in a response to a question about the French political crisis.

Meanwhile, BNP Paribas CEO Jean-Laurent Bonnafe said on Wednesday that whoever becomes France's next prime minister will have to limit public spending amid growing concern about France's fiscal situation.

"It's very difficult to understand who is going to be the prime minister, who is going to be the minister for finance...but it's not that difficult to understand that at the end of the day, this country needs additional discipline in terms of public spending," he said.

-(Reuters)