In France, as the campaign for the second round of the legislative elections enters its final stages, economic issues have almost disappeared from public discourse. Despite being sidelined, they remain critical and will quickly come to the forefront of the next government’s priorities.
Since Monday, daily concerns of the French have taken a back seat. Purchasing power, for instance, was the primary issue cited in voting intentions. Before the first round, competing parties presented detailed solutions: wage increases proposed by the left or lower bills for everyone. These promises seem to have already been discounted. Similarly, the debates among experts about the credibility of the two main opposition forces’ programs, the New Popular Front for the left and the National Rally for the far right, have ceased.
Read alsoThe increase in purchasing power at the heart of the legislative battle
Fear for some, a dream for others, the prospect of the National Rally gaining control of the government, Matignon, has become the primary focus of electoral calculations. This focus has swept aside all economic questions for now. These issues could quickly resurface like a boomerang the day after the second round.
First clue: the stock market reaction the day after the first round
The Paris stock market rebounded sharply on Monday. It clearly signals investors’ view that the worst is over. The markets perceive a National Rally victory as the worst outcome, as the party evokes more fear than the left in financial circles. This fear stems from the National Rally’s hostility towards Brussels. Should the party come into power, it could hinder potential concessions from the European Union in the event of a financial crisis. Consequently, the National Rally is a red flag for the stock market. This fear offers a glimpse into the potential implications of a far-right party securing an absolute majority. The emerging alternative scenario, a lack of a clear majority, does not offer much reassurance to the markets.
Read alsoLegislative elections in France: why is the RN resubmitting part of its program?
The pressure on public finances
With a deficit expanding alarmingly to over 5% in 2023 and a debt exceeding 3,000 billion euros, France’s public finances are now subject to scrutiny. Both Brussels and investors are watching closely. Whatever the outcome of the elections, the French debt market will experience tension in the coming months as a stable government strives to present its roadmap for managing public finances. This crucial topic was absent from this rapid campaign. It is undoubtedly a dry, unpopular subject that candidates chose to avoid endorsing.
Businesses’ wait-and-see attitude
The election results will also impact business operations. The uncertainty that unsettles the markets could similarly paralyze business leaders. If this uncertainty persists, hiring intentions and investment projects, whether among French or foreign companies or among individuals planning to purchase a car or a home, will likely be postponed. Private sector activity declined slightly in June, according to S and P Global, offering a glimpse of what awaits the French economy in the coming months. The story isn’t over yet!
French Elections: Economic Issues Take a Back Seat, But Will Return with a Vengeance
In France, the final stretch of the campaign for the second round of the legislative elections has seen economic issues almost disappear from the radar. Eclipsed by political maneuvering, these issues, however, are far from settled and will undoubtedly resurface with renewed urgency for the next government.
Since Monday, the everyday concerns of the French have taken a back seat. Purchasing power, for example, was the top priority cited in voting intentions, with competing parties offering detailed solutions – wage increases for the left, lower bills for everyone. These promises, however, seem to have already been devalued. The controversies among experts regarding the credibility of the programs from the two major opposition forces – the New Popular Front for the left and the National Rally for the far right – have also faded into the background.
Read alsoThe increase in purchasing power at the heart of the legislative battle
In their place, political maneuvering has taken center stage, fueled by the fear of some and the dreams of others of seeing the National Rally gain access to Matignon. This focus on electoral calculations has swept away all economic questions, but these questions could quickly return like a boomerang in the days following the second round.
First Clue: The Stock Market Reaction the Day After the First Round
The Paris stock market rebounded sharply on Monday. Clearly, investors believe the worst is over. For the markets, the worst-case scenario would be a victory for the National Rally, a party that evokes greater fear in financial circles than the left. This fear stems from the RN’s anti-Brussels stance, which could complicate potential concessions from the European Union in the event of a financial crisis. The RN is therefore a red rag for the stock market. This anxiety provides a glimpse into what might transpire should the far-right party obtain an absolute majority. The other emerging scenario, the absence of a clear majority, doesn’t offer much reassurance to the markets.
Read alsoLegislative elections in France: why is the RN resubmitting part of its program?
The Pressure on Public Finances
With a deficit that is dangerously widening to more than 5% in 2023 and a debt exceeding 3,000 billion euros, the state of public finances has made France a country under surveillance – both from Brussels and investors. Regardless of the election result, the French debt market will be tense in the coming months as a stable government presents its roadmap for controlling public finances. This crucial issue has been conspicuously absent from this expedited campaign, likely due to its unpopularity and the reluctance of candidates to tackle it.
Businesses’ Wait-and-See Attitude
The outcome of the vote will also have a concrete impact on the lives of businesses. The uncertainty that unnerves the markets could also paralyze business leaders. If this uncertainty persists, hiring intentions and investment projects – whether by French or foreign companies or by households planning to purchase a car or a home – will likely be postponed. Private sector activity contracted slightly in June, according to the S and P Global firm, offering a glimpse into what awaits the French economy in the coming months. It seems the French economy hasn’t said its last word!