markets jittery as far-right candidate Le Pen closes the gap

French National Front (FN) leader Marine Le Pen has gained ground against incumbent President Emmanuel Macron in the latest poll ahead of the first round of France’s April 10 presidential election.

Charles Platiau | Reuters

French markets have been rocked as a new poll shows far-right candidate Marine Le Pen narrowing the gap with incumbent President Emmanuel Macron ahead of the country’s presidential election.

The latest Ipsos Sopra Steria Cevipof poll for Le Monde newspaper on Wednesday gave Macron a projected vote share of 26.5% to 21.5% for Le Pen in the first round of voting on April 10, compared to 28% for Macron and 17.5% for Le Pen in the last poll carried out from March 21 to 24.

French bonds fell sharply on Tuesday as a new poll emerged, sending the benchmark 10-year yield to its highest since 2015, while the CAC 40 stock index underperformed the rest of Europe for fall almost 1.3% and continued to decline on Wednesday.

Although Macron is still favorite to win a runoff on April 24, Le Pen, leader of the far-right National Rally party, is now in his strongest polling position yet on a platform focused on restriction of immigration and increased funding for law enforcement. The National Rally has also proposed new promises aimed at assets affected by the cost of living, such as a wealth tax.

The candidacy of Éric Zemmour, seen as even more right-wing than Le Pen, has helped it emerge as a more moderate option than previously perceived and become acceptable to center-right parties disillusioned with Macron’s tenure.

Antonio Barroso, deputy director of research at Teneo, said in a note on Wednesday that voters had begun to coalesce around candidates with the best chance of qualifying, with Le Pen gaining voters from Zemmour.

Barroso said the risk of a Le Pen victory has increased, but Teneo still forecasts a 75% chance that Macron will retain the presidency.

Some of the market jitters at the prospect of a Le Pen presidency have been attributed to worries about the political and economic unity of Europe’s response to Russia following its invasion of Ukraine.

Le Pen has in the past shown sympathy for Russia and President Vladimir Putin, and has been openly skeptical of the European Union.

“Contrary to our expectations, Le Pen was able to avoid criticism over his past ties to Russia, instead focusing his message on the rising cost of living with popular but unrealistic measures such as the abolition of income tax for those under 30,” Barroso said.

“The fact that there were no real debates between the candidates could help her become the most credible candidate on the issue of purchasing power, as the rally around the flag dividends has grown. faded for Macron in recent days.”

After losing the second round resoundingly in 2017, Le Pen is no longer campaigning for an exit from the EU or the euro, but his rise to the presidency would likely put a damper on the bloc’s work.

Kallum Pickering, senior economist at Berenberg, said in a note on Wednesday that if Le Pen was unable to roll back European integration, further progress would likely be stalled.

“With its program of protectionism, backtracking on reforms, subsidies and tough immigration measures, it would probably trigger many conflicts with the EU. The European Commission could then take France to the European Court of Justice. European Communities for breaching EU rules in many cases,” Pickering said. noted.

“His spending proposals could breach EU budget rules once they are reinstated in 2024 after likely being suspended again in 2023 due to Putin’s war.”

Shortly after taking office in 2017, Macron implemented sweeping economic reforms, slashing taxes on investors and rich, easing hiring and firing rules. The data suggests the French economy has rebounded stronger than most of its peers, having entered the Covid-19 pandemic during a period of outperformance.

Berenberg has long believed that Macron’s reforms will position France as the EU’s “engine of growth” over the next decade, but Pickering said that would be under threat with Le Pen at the helm.

“While short-term fiscal stimulus could maintain short-term momentum, subsidies, protectionism and rollbacks from reforms would hurt France’s growth potential,” he added.

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