The legislative snap election in France is set to take place in two rounds, with the first round scheduled for June 30 and the second round on July 7. This decision by President Macron has created uncertainty in the eurozone markets, with economists and researchers from major banks providing forecasts as the election approaches.
Danske Bank predicts that the upcoming French elections could result in a “hung parliament,” which could ease market concerns about significant spending increases. They anticipate that a win by the National Rally (RN) could lead to a rise in spending, but recent actions suggest a decrease in yield spread to Germany regardless of the outcome.
According to ING, if no candidate secures 50% of the vote in the first round, only the top two candidates move forward to the second round. Polls indicate that Marine Le Pen’s faction is leading at 35% of the vote, followed by the Leftist coalition and the center party. There is speculation that Macron’s party may face significant challenges in the upcoming election, leading to potential economic volatility until September.
OCBC explains that for an absolute majority in the National Assembly, a party needs 289 seats. Polls suggest that the far-right Rassemblement National (RN) party and its allies are leading, with other parties trailing behind. The possibility of a hung parliament looms as polls consistently show RN as the most popular party.
ABN AMRO outlines three scenarios for the election outcome: a far-right government, a far-left government, and a hung parliament. In any scenario, it is unlikely that France will meet its deficit target by 2027. The bank predicts varying levels of fiscal deterioration depending on the election outcome.
Rabobank believes that if Macron’s party wins a majority, he may pursue more ambitious reforms, leading to improved debt sustainability. However, a right-wing government could result in policy inertia and worsen debt metrics. The outcome of the election remains uncertain, with several possible scenarios playing out.
MUFG highlights four plausible scenarios for the election results, including a win by the far-right party with or without a majority, a win by the left coalition, or a scenario where no clear winner emerges. The bank predicts potential market volatility depending on the election outcome and the formation of a new government.
Deutsche Bank emphasizes the importance of the upcoming French legislative election for the markets, as it will offer insights into the likely outcomes and potential majority. Polls show Marine Le Pen’s National Rally leading, with the left-wing alliance and Macron’s centrist group following behind. The election results on July 7 will provide a clearer picture of the political landscape in France and its implications for Europe.
