Jordan Bardella, president of the French nationalist and right-wing populist party Rassemblement National, addressed more than 5,000 people at his last rally before the European Parliament elections to be held on June 9 at the Dome in Paris. Supporters give a speech des Sports, June 2, 2024, France, June 2, 2024, Paris, France.
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With just days left before France holds early parliamentary elections, a far-right victory in the first of a two-stage runoff appears increasingly likely.
According to the latest news, the National Rally led by Marine Le Pen and her allies won 36% of the vote, indicating growing support for the party’s Eurosceptic and anti-immigration agenda. Ellabe’s poll Published ahead of the first vote on June 30.
Meanwhile, as of June 27, the left-wing New Popular Front is expected to receive 27 percent support, while President Emmanuel Macron’s Ennahda party is expected to receive 20 percent support.
The shift toward centrist politics has spooked investors and analysts, who warned it could bring about “political paralysis” and a “looming financial crisis.”
But given the complexity of France’s voting system, predictions of the final results of France’s July 7 vote are less clear.
CNBC explores the possibility of a win for far-right France and its impact on markets.
a complex system
Under France’s two-stage voting system, all parliamentary candidates who receive the support of at least 12.5% of locally registered voters will advance to a runoff – a feat that the national assembly is likely to achieve in a large number of constituencies.
But even if it achieves a landslide victory in the first round, the party may be left out at the final hurdle by voters using “le vote utile” (or tactical voting).
When French leaders called on French President Emmanuel Macron to take action, it was seen as part of Macron’s gamble. The National Rally received a surprise vote after recording a record 31.3% gain in this month’s European Parliament elections. Others say the president wants to discredit his rivals ahead of France’s 2027 presidential election, with Macron since claiming a “civil war” would break out if either extreme wins.
Voter turnout in the national election is also expected to be higher than the 51% turnout in the EU vote, and therefore more representative.
With this in mind, analysts believe the National Assembly has a 30% to 40% chance of winning 289 seats, giving it an absolute majority in the 577-seat National Assembly.
A more likely outcome, however, is that the far right makes significant gains and the Rally Nationale could become France’s largest party, but ultimately fail to secure a majority and lead to a highly divided hung parliament.
market turmoil
Holger Schmieding, chief economist at Berenberg Bank, told CNBC on Monday that the impasse could see France’s trend growth slow, yield spreads rise and ” reputation deteriorated globally”.
Already a French blue chip stock The CAC 40 index is facing its worst month since May 2023, having fallen 6% since the vote was announced on June 9. This is the widest in more than ten years.
At the same time, a majority government of a far-right or far-left coalition could trigger even more dramatic outcomes.
Schmieding said either party’s “spending agenda” – whose policies include lowering the retirement age and cutting income taxes – could lead to an “immediate financial crisis”.
Citi analysts said in a note on Thursday that the market was currently “overly optimistic” about a benign outcome, adding that a higher likelihood of a gridlock or extreme parliament could lead to a 5% to 20% drop in French stock valuations.
“Combined What we found Analysts pointed out that French stocks tend to be more volatile than other countries’ stocks before and after elections, which may be a reason to expect further volatility in French stocks.
political paralysis
The chief executive of Paris-based Euronext, Europe’s largest stock exchange group, sought to calm investor concerns earlier this week. told the Financial Times With checks and balances from the president, ratings agencies and the EU, neither the left nor the right can pursue more extreme policies.
Jordan Bardella, Le Pen’s 28-year-old protégé, impressed at rallies across the country on Monday and is expected to become prime minister. plan. These include the goal of restoring France’s deficit to the EU’s cap of 3% of GDP.
However, even with a more prudent fiscal plan, gridlock in Congress could make such policies difficult to implement. Bardella recently emphasized that he “needs an absolute majority to govern” in a bid to boost his approval ratings.
“You start with a deficit of 5.5% and a debt ratio of 110%. Over the next three years you can’t do anything, which means the deficit will not go down. For me, this is the biggest problem that France faces at the moment, Mohit Kumar, chief financial economist for Europe at Jefferies, said on CNBC’s “Squawk Box Europe” on Tuesday.
The same issue is likely to apply to other policy areas, where an expanded national rally will likely fail to win support for many of its key programs. Kumar warned that this would lead to “political paralysis”.
Le Pen, for example, is unlikely to continue her far-right anti-immigration stance – a position that would be unacceptable to the expanded coalition of far-left MPs. At the same time, the center opposes right-wing crime and security plans.
However, the populist Le Pen may be willing to moderate her position on other issues such as EU coordination and fiscal policy, following the example of Italy’s nationalist Prime Minister Giorgia Meloni, who is often criticized for her opposition to her pro-EU counterparts. functional relationships.
“(Le Pen) has always been a Eurosceptic, but I think the views have really softened,” Kumar said. “Maybe she’s becoming more like Meloni in that way.”
Schmieding agreed that Le Pen might become more moderate if elected and said she might unleash her inner Meloni in order to win the ultimate prize: the French presidency in 2027.
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