From Rabobank research, July 8:
Summary
- The French elections resulted in a three-way split. The left-wing NFP secured the most seats, but is well short of an absolute majority.
- Forming a government will thus be hard. We see a caretaker government until June 2025 as the most probable option. A broad alliance or a government led by NFP are less likely.
- This would likely mean policy paralysis however, as such as government would lack a clear mandate. Fiscal consolidation also seems unlikely.
- France’s core position has been largely priced out. Further spread widening requires a catalyst.
Historical in many ways
When Macron dismissed the French parliament he stated that it was a pivotal moment in French history. A win for the far left or far right could spark a civil war according to the Macron. Luckily, the streets have been relatively quiet since the election results came in on Sunday night. However, we agree that the elections were quite remarkable. The turnout was the highest in decades and there were three-way races in more than 300 constituencies.
That is, if there wasn’t an unexpected last-minute cooperation between the left-wing Nouvelle Front Populaire and the centrist Renaissance group. Both parties decided to drop nominees in three-way constituencies to increase the chances of a non-RN candidate winning. It seems that their strategy has worked. And perhaps better than they expected. Whilst the polls initially put Le Pen’s party at 250-290 seats based on the first round’s results, Rassemblement National “only” managed to secure 143 seats. That is still a huge leap upwards from 88 seats they currently hold in parliament, but less than the 156 seats Macron’s centrist alliance won and well short of the 178 seats the NFP managed to secure. RN managed to secure the biggest share of the vote however (37%), which shows how the popular vote and final distribution of seats can differ widely....
....MUCH MORE
