June 13th, 2024

Assessing the risks from the French snap elections

In Short

France unexpectedly goes to the ballots: In last weekend’s European elections the right-wing National Rally (RN) party of Marine Le Pen emerged as the winner with 31.4% of the votes, about twice as much votes as President Macron’s Renaissance party (14.6%). In a surprise decision, Macron dissolved the Parliament for snap elections on June 30 (1st round) and July 7 (2nd round). The most similar issolution, since the launch of the 5th Republic in 1958, is Jacques Chirac’s one in 1997; it was also seen as a tactical manoeuvre, which ended badly with the President losing his large majority in Parliament.

Highlights:

President Macron has unexpectedly called for a snap election. The voting system – different from that of the European elections – makes predictions difficult, but it looks like this may backfire, like it did for President Chirac in 1997.
A lack of majority (stalemate) or a RN-led government appear to be the most likely scenarios. We discuss those, as well as four alternatives.
Key market focus will be on fiscal risks. Reassuringly, Le Pen’s ultimate target is to win the 2027 Presidential election, and she will be keen to avoid a repeat of the Salvini and Truss fiscal and market crises. Investors will also fret about the risks of a much slower pace of European integration and waving support for Ukraine.
In a highly fluid and uncertain environment, market concerns may grow into the first round on 30 June.

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Assessing the risks from the French snap elections

June 13th, 2024

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Assessing the risks from the French snap elections

In Short