France: Potential economic impact of upcoming elections
March 30, 2022
In less than two weeks, the French electorate will head to the polls, as citizens cast their votes in a presidential election that includes 12 candidates from across the political spectrum: from far-left communist Fabien Roussel to far-right nationalist Eric Zemmour. In a highly volatile campaign centered around purchasing power, inflation, high energy prices and the post-pandemic economic recovery, the last stretch of the Présidentielle 2022 will seemingly be defined by Russia’s invasion of Ukraine. The outbreak of war in the east of Europe has once again brough France’s role on the international stage to the forefront. According to most polls, President Emmanuel Macron has managed to stay comfortably ahead of the pack for the past few months, having received a significant boost in public opinion in recent weeks for his role as intermediary during the conflict. Three-time presidential candidate Marine Le Pen occupies second place. That said, Parti de Gauche’s Jean-Luc Mélenchon has emerged as a significant last-minute contender, in third place, with Valerie Pécresse and Éric Zemmour following close behind. Although undecided voters—which make up an estimated 40% of the electorate—and substantial absenteeism will be significant and potentially deciding factors, most of our panelists expect a déjà vu of the 2017 second round of presidential elections between Macron and Le Pen.
On the one hand, a Macron reelection should represent a continuation of his current five-year term’s macroeconomic policies focused on business-friendly labor market reforms at home. Most notably, the controversial pension reforms, which unleashed massive nationwide protests and were promptly put on hold due to the outbreak of the Covid-19 pandemic, are set to continue if he is elected. Similarly, his foreign policy agenda is expected to put France at center stage in international politics, with a continuation of economic sanctions on Russia and a largely pro-EU stance. That said, a parade of consecutive crises—notably the ‘Yellow Jacket’ protest movement, the pandemic and the Russia-Ukraine war—have continuously forced Mr. Macron into an expansionary fiscal stance, and will make it hard to gauge to what degree he will be able to make good on his plans going forward.
Meanwhile, if Rassemblement National’s Marine Le Pen emerges victorious, the outcome is expected to be more speculative. Although she leans hard-right on immigration, defense spending and international affairs, her proposals for the 2022 elections include a wide array of fiscally expansionary programs. They include: sizable hikes to the minimum wage, tax exemptions for people under 30, and considerable tax reductions on energy and gasoline to offset spiking inflation. In terms of foreign policy, Le Pen has largely softened her stance on a potential “Frexit”. Nevertheless, her plans include restrictions to the free movement of people within the Schengen zone, France’s withdrawal from NATO’s integrated command and an easing of economic sanctions on Russia—mainly to counteract their repercussions on French consumers.
Commenting on the potential outcome of the elections, analysts at the EIU predict a comfortable victory for president Emmanuel Macron:
“EIU expects Emmanuel Macron, the incumbent, to be re-elected president in April 2022. Mr. Macron has been playing a leading role as a mediator in the Russia-Ukraine war. This boosted his status over his opponents, who are struggling to remain visible while he reinforces his presidential stature. In times of crisis there is a tendency to rally around the current leadership and choose stability over change. This will play to Mr. Macron's advantage, particularly because foreign policy has always been one of his strong suits. [...] The main risk to Mr. Macron's re-election is high abstention in the second round.”
Meanwhile, Alain Durré and Alexandre Stott from Goldman Sachs, see a more open presidential race:
“Although far-right candidate Marine Le Pen (Rassemblement National, RN) is leading the competition to face Macron in the second round, far-left candidate Jean-Luc Mélenchon (La France Insoumise, LFI) has seen his polling rise sharply over the last two weeks, suggesting he has gained support among undecided voters, and could therefore be the surprise contender against Macron. […] A lot can happen in the next two weeks, especially because polling uncertainty tends to fall sharply in the last ten days before the election.”
Author: Jonuel Pérez, Junior Economist