PARIS (Washington Insider Magazine) – After a great performance in a heated debate, French electors are set to give President Emmanuel Macron another term on Sunday, choosing him over right-wing contender Marine Le Pen. Investors, on the other hand, remain jittery.
Traders are bracing for an unexpected Le Pen victory, which would shake Europe’s 2nd largest economy as worries of a regional recession mount, according to surveys.
Citi analysts placed the chance of a Le Pen victory at 35 percent in a report released on Tuesday. Nonetheless, they advised investors to protect their investments on French national bonds and warned that a victory for Le Pen would be bad for the market.
Even if she has withdrawn her commitment to pull France out of the EU, a win for Le Pen will instantly raise doubts about France’s financial and political relations to the union. Her policy aims, such as preventing immigrant labor from entering France, that would put an end to Europe’s freedom of movement, might yet cause severe tension.
According to Grégory Claeys, a senior scholar at Bruegel, a Brussels research institute, this might lead to a “Frexit,” or a French exit from the European Union “by accident.” If France, under Le Pen’s leadership, continues to pursue policies that violate EU legislation, he predicts a financial exodus as businesses move money out of the nation, similar to what happened after the United Kingdom opted for Brexit in 2016.
Economy center and front
In the 1st round of polling earlier in the month, Le Pen gained popularity by emphasising the rising expense of living while toning down her anti-Islam and anti-immigrant rhetoric.
Inflation in France reached 4.5 percent in March, causing consumer trust to plummet to its lowest point in over a year. Energy costs have increased by 29 percent since Putin’s assault in Ukraine, while food costs have skyrocketed by roughly 3 percent.
Analysts have predicted that France’s GDP will contract later this year because inflation bites into consumer spending.
Le Pen has promised to recoup between $163 to $217 a month in family buying power by lowering road tolls, lowering fuel taxes, and decreasing social benefits such as immigrant housing subsidies.
In a discussion on Wednesday, Macron slammed her ideas, saying it’s better to keep government programmes that benefit the poorest people rather than pursue less focused measures like lowering gasoline prices.
He also touted the 1.2 million jobs he helped generate under his presidential term, as well as the government’s decision to preserve a brief price restriction on gas and electricity, which has significantly kept inflation under control in France.
Nonetheless, as Macron seeks to attract millions of uncertain voters, increasing prices pose a threat. According to the daily Le Monde, around 40% of the French population lives on under $1,736 a month, and most of them refrained or backed hard-left leader Jean-Luc Mélenchon during the 1st round of elections.
If Le Pen is elected
Since the 1st round, Le Pen’s popularity has plummeted, owing to her prior backing of Russian President Putin, while Macron remains the frontrunner. He does have an 80% possibility of reelection, according to Eurasia Group.
If Le Pen wins, however, it will stun economic markets, which are already anxious owing to the Ukraine conflict and dwindling economic growth projections.
Markets immediately worried when Trump became US president in 2016. Investors believed that calmer minds would win and Trump would be stopped from implementing his most radical plans, thus the worries were short-lived.
The consequences of the United Kingdom’s decision to exit the European Union lingered for a longer time. The value of the British pound plummeted, and it has yet to recover from its low point in June 2016.
Last Monday, Amundi, a French financial management company, informed customers that due to the economic uncertainties and the conflict, it does not advocate acquiring European equities currently. Another incentive to stay away, it stated, is the French election.
While Marine Le Pen has backtracked on her prior pledge to exit the European Union, she remains dedicated to severing France’s relations with the bloc through a number of referendums. When she does strive to prevent employees from neighboring European Union countries from moving to France, and if she implements efforts to stifle free movement of commodities, it will raise difficult concerns about the nation’s — and the EU’s — future.
The magnitude of a potential Le Pen mandate would be determined in large part by parliamentary elections in June.
It would cut her wings, certainly on domestic affairs, if she needed to seek a bigger coalition of backing, noted Jessica Hinds, Europe economist from Capital Economics. As a result, a Le Pen administration may not be as far-reaching as many speculators fear.
