France: Le Pen would be difficult, but manageable for Europe

Presidential elections are scheduled to take place in France on 23 April and 7 May. A French election has seldom aroused so much international attention so many months in advance of the poll. The outcome is meanwhile more uncertain than ever. After leading the polls by a long way at the beginning of the year the Republican Fillon’s opinion poll scores have fallen substantially due to allegations of corruption. The candidate of the right-wing populist Front National, Le Pen, now has the highest scores in the opinion polls for the first round of voting. She can expect around 25% of the votes. The independent liberal candidate Macron has benefited most from the allegations against Fillon. At slightly over 20% he is currently in second place for the first round of voting. Around 15% of French voters said they would vote for the socialist Hamon, who is positioned on the far left.

In the final round of voting, however, Le Pen’s chances of really becoming president would be much lower. The reason is that Le Pen will presumably be able to mobilize a lot of her voters in the first round of voting while the supporters from the moderate spectrum will still be shared between several candidates. We estimate Macron’s chances of becoming president are the highest at around 47%. Fillon follows in second place with 26%, whereas we estimate Le Pen has only a 19% chance of winning the election. Compared to mid-January, when Fillon was still leading in the opinion polls, Le Pen’s chances of becoming president have increased by around 6 percentage points. But if Fillon withdraws his candidacy contrary to previous statements, this would probably increase Macron’s chances of victory yet more significantly given the large overlap between the political positions and voter groups of the two candidates.

Investors are restless because of Le Pen’s good opinion poll scores for the first round of voting. The yields of ten-year French government bonds have risen disproportionately steeply compared to Bunds. If Le Pen wins the election, this trend would probably accelerate. But even if Le Pen were to become France’s next president, after the parliamentary elections in June she would presumably have to cooperate with a Republican parliamentary majority as well as with a government dominated by the Republicans.

The exit from the Euro that Le Pen is aiming for would legally require that France leave the EU, which to date Le Pen does not want and which would also require parliamentary approval. Furthermore, EU membership is anchored in France’s constitution. A Le Pen election victory would be another political blow for Europe and the Euro area, but it would be manageable.

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