Seven Reasons Why The French Election Matters

By Michael McKenna

 France’s two-round electoral system is explicitly designed to protect the Republic against populist insurgents, but Front National leader Marine Le Pen’s support just might be broad enough to carry her nationalist party to victory on May 7.

That said, however, centre-left candidate Emmanuel Macron remains the odds-on favourite as many expect supporters of the left, the centre, and the liberal right to back the pro-European Union candidate in a last-ditch effort to hold the forces of populism at bay.

With centre-right contender François Fillon’s chances of a win obliterated by a web of financial scandals surrounding the alleged “fictitious employment” of his wife Penelope as his “parliamentary assistant” for a total salary of €500,ooo over eight years, the French vote has become a two-candidate duel between the status quo and the insurgent nationalism that brought us Brexit and Trump.

This is the main reason why the French election is so important: it is essentially set to be a referendum on an international order that dates back to the Second World War. But beyond this main issue, there are also a few more particular questions that hand in the balance.

Here is our take, then, on the seven reasons why the French vote is so important to France, Europe, markets, and the world.


The national question

What more is there to say? There are two worldviews active in European politics, and they are as oil and water. In the one, dominant since 1945, the world’s nations exist within a framework bounded by multilateral institutions and agreements; the movements of capital, goods, and people should be as free as is possible (and should only grow more free over time); and the great taboos are cultural chauvinism, ethnic prejudice, and isolationism.

In the other, ever-present but ascendant on the back of the Brexit vote and Donald Trump’s victory, the world’s nations exist in a Hobbesian space of absolute sovereignty and are presumed to exist in service to their cultural or even ethnic founding-groups; the movements of capital, goods, and people are restricted along lines of cultural and economic protectionism; and the great taboos are globalisation, foreign decision-making (whether from Brussels, the United Nations, Nato, or wherever else), and military adventurism.

The French election, like Brexit, Trump, and the recent Dutch vote, is and will be seen by the world as a referendum on these two visions. The ultimate outcome of this political choice will define history for decades or even centuries to come.


The euro 

Marine Le Pen has promised to eliminate the euro and bring back the franc if she is elected. Such a move would fracture the Eurozone at its historic Franco-German heart, dealing the common currency a wound it would not be certain to survive. 

Centre-right think tank Institut Montaigne has said that a French withdrawal from the euro would result in a 9% long-term drop in French GDP (at best), a 20% drop in the exchange rate of the newly resuscitated franc, and the potential for 500,000 French jobs to be lost in the longer-term.

Le Pen, for her part, has called this brand of doomsaying “a shameless lie”, stating that there exist many previous projections from banks, law firms, and economists that do not predict “absolute catastrophe” in the event of France departing the Eurozone and adding that Italy, Spain and Greece would likely abandon the euro on a ‘Frexit’.

This election is an existential one for EUR.


The French recovery

France’s economy continues to lag Germany and Britain and unemployment has risen during the Hollande era; it stood at 10% in the fourth quarter of 2016, which is the 8th highest rate in the 28-member EU. Macron’s plans to boost growth include allowing negotiation of the 35-hour work week at the company level, the reform of employment tribunals, and cutting government spending to 50% of GDP. 

Le Pen’s include fixing the retirement age at 60, maintaining the 35-hour work week, “reindustrialisation” and protectionism.

In the strictest economic terms, the “far-right” Le Pen is thus running to Macron’s left, another reason that markets would cheer a centre-left victory.


The union

Marine Le Pen is not only promising to pull France out of the Eurozone; she wants France out of the European Union itself. In an interview with former Ukip leader Nigel Farage held March 15, the Front National candidate said that the UK’s Brexit vote represented British voters finding “the keys to the jail” that is the EU.

The EU is the second-largest economy in the world in nominal terms and its creation is a pillar of the postwar world order. To proponents, it represents free trade, open societies, and pan-European solidarity. To its detractors it is a stealth empire wherein unelected officials hold undue sway over the EU’s constituent nations. It is no exaggeration to say the EU’s future hangs in the balance of the French vote.

Immigration

The policy differences between macron and Le Pen are perhaps most stark in the area of immigration. While Macron maintains that Europe “must get used to mass immigration”, regarding the phenomenon as “unstoppable” and noting that immigrants bring “fresh bursts of creativity and innovation” to French society, Le Pen seeks to restrict immigration to the country. 

In her view, mass immigration has “pushed France to the brink of civil war” as immigrants “speak their own language and follow their own rules and traditions”. Confronting the view that immigration is necessary to boost the economies and social structures of low birth rate European countries, Le Pen claims that migrants have cost France “tens of billions of euros”.


Trade

While Le Pen’s stances on multiculturalism and immigration are determinedly right-wing, it would be inaccurate to paint Macron as a man of the left, at least insofar as economics are concerned. Instead, the electoral favourite is a Third Way politician of the Clinton/Blair mode, championing openness in terms of trade, markets, and investment, and standing in opposition to the dirigisme that has long characterised the French economy.

Le Pen, for all of her cultural right wing bona fides, is a champion of France’s traditionally Socialist and now dispossessed-by-globalisation working class who polls well in French “rust belt” communities and supports protectionism, the expansion of the public healthcare network, monopolies such as the postal service, and the subsidisation of French industry.


Germany

Despite a post-migrant crisis rise in support for the right-wing Alternative für Deutschland party, Germany’s September 24 election still looks set to be a contest between two pro-Europe, anti-populist candidates: the incumbent Angela Merkel and the SPD’s Martin Schultz.

A Le Pen victory in France is unlikely to push Germans to the political right in any significant number, but it would leave Berlin in relative isolation as the sole champion of a Eurozone and EU in total disarray.

A Macron victory, meanwhile, would likely be taken by markets and political observers alike as a dramatic show of support for the Franco-German alliance that arguably acts as the EU’s key axis of support.

Trade the French election

Brexit, Trump and volatility defined 2016 and Europe can only expect more turbulence in 2017. The French election is the first major political event of 2017, potentially testing currency and equity markets across Europe. Learn more about the opportunities and risks related to the event and how you can navigate the volatility surrounding the election.

Learn more

Brexit, Trump and volatility defined 2016 and Europe can only expect more turbulence in 2017. The French election is the first major political event of 2017, potentially testing currency and equity markets across Europe. Learn more about the opportunities and risks related to the event and how you can navigate the volatility surrounding the election.

Learn more