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
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