The French political landscape is facing uncertainty once again, this time due to the early elections called by President Emmanuel Macron in response to the European elections. The rise of Marine Le Pen’s party, Rassemblement National, has led to the dissolution of Parliament and the scheduling of legislative elections in France. With polls showing Rassemblement National likely to win a majority, the outcomes of these elections are pivotal.
The situation is further complicated by France’s unstable public finances. French public debt is high, with a per capita debt that is expected to rise even further in the coming years. The decision to call early parliamentary elections has raised concerns about the country’s fiscal consolidation path and the prospects for economic reforms. Moody’s has warned that prolonged political instability could negatively impact French banks.
Investors are also concerned about the economic programs of the two coalitions that could potentially win the elections. Rassemblement National’s manifesto lacks a commitment to secure the state budget, while the left-wing coalition, New Popular Front, presents a radical program with proposals for fiscal progressivity and public sector expansion. These economic programs have led to increased market volatility and uncertainty.
Despite this uncertainty, analysts suggest that the market impact of the French elections could be neutral at best. However, there are concerns about a potential financial crisis in Europe if Rassemblement National were to win and increase volatility in financial markets across Europe.
Overall, investors should remain vigilant as they navigate through these uncertain times in French politics and monitor closely how events unfold after these elections are held on October 27th and 28th 2019.
