“[Today’s] challenges require clarity in our debates, ambitions for our country and respect for each of our citizens — that’s why I’ve decided […] to give you again the choice of our parliamentary future,” Macron said from his office in the Elysee Palace.
But the results of France’s snap legislative elections have now provided everything but clarity.
The country’s leftist alliance New Popular Front (NFP) is now set to become the biggest group in a new parliament, after beating the resurgent RN into third place. The NFP is still short of an overall majority. Macron’s centrist alliance held up better than expected and is set to end up in second place, albeit with dozens fewer members of parliament.
Macron’s snap election came as a surprise to most people, including investors, recalls Philippe Crevel, economist and head of Paris-based Cercle de L’Epargne think tank.
“France’s stock market index CAC 40 went down by about 8% within a week and interest rates for French public debt went up,” he told DW.
On Monday, as investors digested the runoff results, the CAC opened 0.4% lower but quickly recovered ground.
NFP’s post-election plans have investors nervous
Despite the prospect of weeks of political uncertainty, the newly founded NFP has already started detailing its post-election plans. The alliance includes the far-left movement France Unbowed, the Socialist Party, the Greens and the Communist Party.
The new largest group in the National Assembly is promising generous measures to boost voters’ purchasing power. They are planning on withdrawing Macron’s 2023 controversial pension reform that raised the minimum retirement age from 62 to 64 years. The NFP intends to reduce that threshold to 60 years.
“It’s surreal — France faces a financially dire situation, and yet, all the parties, including Macron’s, are trying to lure voters by promising to lavish money on them,” Crevel said. “Politicians have been doing this for the past 40 years, but now we’re close to the precipice.”
France’s public debt in 2023 stood at about 110% of GDP with its budget deficit amounting to 5.5%. The European Union recently opened an excessive deficit procedure against France, as the EU’s Stability and Growth Pact only allows for a public debt of 60% of GDP and a 3% budget deficit.
Does the market prefer the RN?
But despite a spendthrift agenda from the NFP and Le Pen’s RN, investors seem to prefer the far-right party’s economic platform, Crevel said, going into Sunday’s runoff.
“The NFP are anti-capitalist and anti-European, as they want to leave the Stability and Growth Pact and international free trade agreements, whereas the RN is no longer openly displaying anti-EU views — although their platform is incompatible with European rules,” Crevel said.
If elected, the RN had planned to exit the EU electricity market and reduce France’s contribution to the EU budget. The party also said it would introduce systematic immigration controls at national borders, which would go against border-free Schengen area rules.
Christopher Dembik, senior investment advisor at Pictet Asset Management France, concurred the RN’s election platform was less of a concern to investors than the NFP’s.
“The financial world is more alarmed by the NFP’s showcased opposition to EU rules than by the RN’s plans to, for example, reduce VAT on electricity, gas and fuel from currently 20% to 5.5%,” which he would have merely required a negotiation with the EU.”
“Plus, the far right has pledged to audit public finances, which indicates their intent to bring down France’s debt,” Dembik added.
But Michael Zemmour — unrelated to controversial far-right former presidential candidate Eric Zemmour — will likely be relieved at the RN coming third in the runoff.
“There’s this fake impression that the NFP would ruin the French economy with their Keynesian program focused on spending, although the RN is electioneering with tax cuts financed through xenophobic measures such as taking away health care from foreigners,” the economic researcher at the University Lumiere Lyon-2 and Sciences Po Paris told DW ahead of the vote.
“Apart from the fact that this is morally reprehensible, the RN keeps changing its mind by modifying for example the date of a supposed withdrawal of Macron’s pension reform — it’s impossible to assess their economic platform seriously,” he said.
“It’s shocking that the business world seems to prefer xenophobia to redistribution — also arguing that the RN would tone down their policies like Italy’s current far-right PM Giorgia Meloni did once in power,” he added.
Will France face a crisis after the election?
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More instability could be looming
Following Sunday evening’s results, the NFP could try to form a minority government or be part of a coalition, which would likely prevent the leftist alliance from implementing its most drastic measures.
Mujtaba Rahman, managing director Europe at New York-based political risk consultancy Eurasia Group, believes the surprise outcome will cause political and financial instability.
“France is looking at a parliamentary deadlock with two large ideological blocks and the center squeezed in the middle with an enfeebled, delegitimized president, a caretaker government with no capacity to deliver and a significant risk of civil strife,” he told DW.
Rahman had warned ahead of the second round that an RN-led government would put France on a collision course with Europe.
“Their policies, such as the national preference, which would take away fundamental rights from foreigners, don’t sit well with the EU’s level playing field and the rules governing the single market.”
“What’s more, their fiscally expansive program could incite other populists such as Meloni to do the same, which could call into question the stability of the rest of the euro area,” Rahman said.
Edited by: Ashutosh Pandey
This article was first published on July 5. It was updated on July 8 to reflect the election results.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
