French Far Right Holds Strong Lead Ahead of Vote: What to Watch

Article Content

(Bloomberg) — President Emmanuel Macron’s decision three weeks ago to call early elections upended any semblance of political stability in France and opened the door to the possibility of forming the first far-right government in the modern republic.

His call to dissolve the National Assembly not only shocked the public and markets — sending some risk indicators to levels last seen during the eurozone crisis — but also caught Macron’s government by surprise.

Article Content

But the question that remains unanswered is: Why did Macron put himself in this position if it was not necessary?

He made this decision on the night of June 9 after Marine Le Pen’s far-right National Rally party received twice as many votes as his centrist coalition in the European Parliament elections. Macron claimed he could not ignore the results, while also warning that the “rise of nationalists and demagogues” threatened France and Europe.

Essentially, Macron is forcing voters to make up their minds about whether they prefer his pro-business, pro-European, pro-Ukrainian vision for France or Le Pen’s agenda of dramatically cutting immigration, rolling back EU rules, and reversing some of Macron’s pension reforms.

It could put the National Rally in a position of having to govern for the first time, creating a concrete record ahead of the 2027 presidential election, when Macron will not be able to run due to term limits.

The voting process will take place on Sunday in the first round, with a run-off round being held on July 7.

Here are the key issues to watch:

Winners and Losers

As of Friday — the last day polling companies are allowed to publish forecasts before the vote — the National Rally and its allies had a solid lead, on track to get 36.2% of the vote, according to a Bloomberg poll of exit polls.

Article Content

Article Content

The left-wing coalition – which includes the Socialists, Communists, Greens and the far-left France Insoumise party – was on track to take 28.3%, while Macron’s centrist group was expected to get 20.4%.

Seat projections

The vote shares in the first round do not tell the whole story – the deciding factor in forming the next government is the distribution of seats in the 577-member National Assembly after the second round.

While the two-round vote makes seat predictions difficult, the National Rally and its allies are expected to become the largest group in the lower house of parliament with between 238 and 281 members, according to final exit polls conducted by Bloomberg before the power outage on Friday evening.

When the results of the first round come out on Sunday, polling companies will have a lot more data that could help them improve these forecasts. This information will be crucial for parties in determining their election campaign strategies, and for investors trying to assess what type of instability awaits them.

Transformation

Far more people are expected to cast their votes than in many previous legislative elections, according to surveys. This is important in the French system, because it increases the chances of more than one candidate making it to the second round, creating less predictable three-way or even four-way races, known as triangles and squares.

Article content

In 2022, there are only eight triangles. This time, the number may swell to between 160 and 200, according to a June 26-27 Odoxa poll of 2,005 adults.

The Ministry of Interior is scheduled to publish provisional figures on the turnout rate at noon and 5 p.m.

coexistence or minority government

Any group able to obtain an absolute majority of 289 seats or more will control the lower house of parliament. They could easily pass laws and a government supported by that group would be safe from the threat of a vote of no confidence.

If the group that gets the majority is from a different party than the president, which has happened three times since France’s current form of republic came into effect in 1958, this leads to a type of power-sharing arrangement called coexistence. The president generally chooses the leader of the party with the majority as prime minister. But the gathering, which includes the National Rally, will be the first time a party that has not governed before will participate.

If a group wins the most seats but falls short of an absolute majority, it can form a minority government — like Macron’s current situation. But that also depends on the president, who has the sole power to appoint a prime minister.

Article Content

A hung parliament would make it difficult to legislate because the government would need to find additional votes outside its own party for each bill. If the government used a constitutional provision that allowed it to override the vote, it would open the door to a vote of no confidence, which could be overturned if rival parties came together.

National Rally leader Jordan Bardella said he would refuse the post if his party and its allies did not obtain an absolute majority in the National Assembly.

Markets

Macron’s decision to call elections sparked market turmoil in France, leading to a sell-off in shares that initially wiped out nearly $200 billion in value.

The yield on 10-year French government bonds rose at one point on Friday to its highest level since November. This expanded the additional yield demanded by investors on French debt compared to similar German government bonds to 86 basis points – the highest level since 2012. Meanwhile, the benchmark CAC 40 stock index fell to its lowest level since January.

Policies

The three leading groups in the French elections propose radically different paths.

Article content

Macron’s party advocates continuity, with more tax cuts and pro-business reforms, along with a commitment to rein in spending. In response to voter concerns, his group has added pledges to improve incomes for low-income earners through tax reforms and measures to help homebuyers.

The National Rally has promised to cut immigration, toughen France’s stance on law and order by increasing prison places and minimum sentences, and cut VAT on energy and fuel. Following a massive sell-off of French assets, the party has postponed some of its most costly measures – perhaps indefinitely depending on a review of public finances.

The New Popular Front has the most radical economic programme. In the short term, it says it will freeze prices on basic consumer goods, scrap Macron’s pension reforms, and raise the minimum wage by 14% and public sector salaries by 10%. Additional annual spending is expected to reach €150bn by 2027, to be financed entirely by taxes on corporations, finance and the wealthy.

Article content