French Election: Will the Far-Right Win a Majority?
French voters will head to the polls on Sunday, July 7, for round two of the parliamentary elections. In the first round, Mary Le Pen’s far-right National Rally party (RN) made big gains and won 33% of the vote. President Macron’s Ensemble alliance was relegated to third place, as voters delivered the president a stinging rebuke after he called the snap election.
Macron finds himself on the ropes and is desperate to prevent the NR from winning a majority in parliament. The NR is poised to become the biggest party, but it will need to pick up 289 seats of the 577 seats in parliament in order to be assured of an absolute majority. Election polls are projecting that the NR will win between 190 and 250 seats, which would mean that no single party can form a government on its own, leaving both the left and the right blocs maneuvering to form a coalition.
The scenario of no clear winner in the election, known as a ‘hung parliament’, could lead to weeks of political paralysis, which could easily result in fluctuations in the financial markets.
An outright majority for the NR would be a nightmarish scenario for the markets. Le Pen is a Eurosceptic and has previously advocated that France leave the European Union, abandon the euro and revert back to the French franc. Le Pen has opposed market liberalization, and with a parliamentary majority, the NR could enact legislation, that puts France at odds with the European Union. In the past, when the NR had electoral success, French markets reacted negatively. This would likely repeat itself if the NR wins a majority on Sunday.
Despite the uncertainty ahead of the election, investors aren’t panicking. The CAC 40, the benchmark French stock market index, posted slight gains this week and the euro has looked sharp, climbing 1.06% this week against the US dollar. If the euro can hang on to these gains, it will mark its best weekly gains in 2024. If the NR falls short of a majority, as expected, investor confidence should remain steady, provided that Macron can quickly form a coalition.