Marine Le Pen’s second coup has put European stock markets in a good mood. The right has indeed won, but without overdoing it and the possibility of a transitional government, perhaps a technical one, seems to please investors
01/07/2024
Jordan Bardella He may not be Prime Minister of France, but it is certain that the transalpine right, which answers to the name of Marine Le Pen, took another step forward, while not breaking through the lines. The markets, which do not like extremism, could have stiffened in the face of the second electoral coup (the first was delivered by the European elections) of the daughter of Jean Marie Le Pen. And instead, no, they kept their nerves steady, almost relieved. Reassured, perhaps, by the fact that even if Giorgia Meloni has shown that it wants a Europe that is as united as possible and certainly not prey to nationalism, then a constructive dialogue between the right and Brussels is possible. Or perhaps, it was enough that the right won, but without spreading.
The fact is that Europe woke up the day after the French vote with buoyant and good-humored stock markets. Ressemblement National will probably not have an absolute majority in the National Assembly and that is enough to open a scenario of political uncertainty, with the possibility of a transitional government in Paris, perhaps even a technical one. But it is not the Apocalypse and this does not displease the financial markets. So the stock markets of the Continent have rebounded. From the French Cac40 which opened trading gaining 2.6% (after losing 2% last week) to Piazza Affari, which soared by 2%, before falling back to the 1% area. Frankfurt also did well, +1.1%, Madrid, +1.6% and London +0.6%.
In the wake of the good mood of the stock markets, also the debt markets. The spread between the French government bonds OAT and the German bund has shown itself to be decreasing since the morning to 67 basis points, while the difference between BTP and Bund has reached 153 basis points, with a yield of 4.05%, both values decreasing compared to last week. All this was certainly not a given. We must never forget that the French debt, in absolute value, is the largest in Europe, equal, at the end of 2023, to 3,101 billion euros. In 2024 the public deficit will be higher than 5% of GDP, among the highest in the Eurozone, while the debt, close to the 110% threshold, is expected to continue to increase in the coming years.
It is no coincidence that according to the rating agency Fitch, the decision to call early parliamentary elections has increased uncertainty about the country’s fiscal consolidation path and the prospects for further economic reforms. According to Unicredit analysts, the most likely scenario is that of a hung parliament in France, therefore without a defined political majority, which could lead to the formation of a technical government. France would therefore go straight towards years of immobility, which would last until the next presidential elections in 2027. This would not help the serious problems that the French economy is suffering from, but it would have the merit of allowing companies to operate more or less normally and to continue to make profits. Perhaps this is also why the markets are satisfied, because the worst-case scenario, that of a government led by Rn, has been avoided. That is enough.
