Markets hold their breath on French poll
FRANCE’S presidential contest holds the greatest risk to markets of the three big elections scheduled to take place in Europe this year, the other two being in the Netherlands (March 15) and Germany (in the autumn).
Victory for Marine Le Pen, by achieving a majority either in the first round on April 23, or the second-round top-two run-off on May 7 is unlikely.
Le Pen, viewed as very rightwing, is anti-immigration and committed to taking France out of Europe and the euro, as well as cutting public sector spending and making the 35-hour working week more flexible.
But she would also like to reduce the retirement age and increase the top rate of tax, which is more out of the left’s playbook.
Although there is scope for an “accident”, the polls are so conclusively against Le Pen winning through – in a way they never were against Brexit or Trump – that it is logically hard to see her doing it. But what if Le Pen did win? It would be a “risk off ” moment for global markets, with funds likely to run towards the dollar and the yen.
Her main opponents, François Fillon and Emmanuel Macron, are reformists, promising smaller government, lower business taxes and greater labour flexibility – good for France’s economy but likely to generate severe industrial unrest during the implementation.
One should not ignore Benoît Hamon, the very left Socialist candidate, although his chances of reaching the Élysée Palace look slim. He is proposing to cut the working week even further, crack down on executive pay, but, more intriguingly, wants a tax on “artificial intelligence”, robots and automation.
If I were to speculate on the outcome now, it would be that Fillon or Macron will end up as president.
A similar outcome is probable in the Netherlands, with the Freedom Party (hard right, anti-immigration, anti-Europe) on track to gain the biggest share of votes but no power as it is squeezed out by a more moderate coalition. John Wyn-Evans is head of investment strategy at Investec Wealth & Investment