The re-edition of the 2017 duel highlights the political divide between a reformist social-liberal pro-European camp and a demagogic and regressive nationalist bloc. The PS (Socialist Party) and LR (The Republicans) are in shambles.
The outgoing president, Emmanuel Macron, will have to fight a tougher battle for re-election than he did five years ago. His far-right opponent, Marine Le Pen, has learned from her mistakes in 2017, when the two candidates faced off for the presidential mandate for the first time. The outcome is significant for investors because, although Ms. Le Pen has softened her anti-European positions, her ambition remains for a less liberal and more nationalist France.
When President Macron came to power in May 2017, he advocated for stronger EU budget and defense integration, to ensure that Europe could stand up to the United States and China. Over the past two years, the pandemic and Russia’s invasion of Ukraine have led to the adoption of budgetary measures at the European level to support the economy and public health and, more recently, a commitment to increase military spending. Over the past five years, Emmanuel Macron has insisted on better EU coordination in defense and budget matters.
The French economy recovered more quickly from the pandemic than any other Western economy after the United States. The French gross domestic product (GDP) grew by 7% in 2021 when the economic impact of the pandemic waned, marking the fastest growth rate in more than half a century. According to the European Commission, the French economy is expected to grow by 3.6% in 2022.
The potential political impact of a cost-of-living crisis should not be underestimated.
Nevertheless, at 4.5%, the annual inflation rate in March in France was lower than that of its close neighbors, Spain (9.8%), Germany (7.3%), and Italy (6.7%).
What impact for financial markets? One of the main concerns of financial markets is that a nationalist government leading a major EU member state could lead to less coordination of European economic and budgetary policy. The issue at stake is the transformation of France’s international stature and ambitions.
by Garibaldino
