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The scenarios below outline the prospects of the two candidates'
ability to implement their electoral programs in the event of
victory, based on different degrees of parliamentary support
following the legislative elections in June. Failure by the next
president's party to secure a parliamentary majority would increase
the risk of 'co-habitation' with a prime minister from a different
party, significantly reducing his/her prospects of implementing
his/her electoral objectives.
Key findings
Polling on voting intentions in the second round of the
presidential election indicates that, for the first time, a victory
for Marine Le Pen is possible.
A high abstention rate among supporters of far-left candidate
Jean-Luc Mélenchon would be likely to favour Le Pen and would be a
decisive factor in victory for her in the second round.
A victory for Le Pen would be likely to lead to a significant
shift in France's foreign policy direction, towards a more
Eurosceptic and NATO-critical stance.
A Le Pen victory would lead to a downward revision of S&P
Global Market Intelligence's GDP growth forecasts, as well as an
increase in French bond spreads and a depreciation of the
euro.
We expect that economic policy direction would remain unchanged
under a second term for incumbent Emmanuel Macron, with lower taxes
and more flexibility in the economy remaining priority
objectives.
After the election, protest risks are likely to remain high
regardless of which candidate secures victory.
Among the main policy objectives of the candidates, those
entailing pension, tax, and labor reforms are likely to be some of
the most contested, particularly Macron's proposed increase in the
retirement age.
The outcome of the June parliamentary election will be a key
indicator of the next president's ability to implement his/her
preferred policy agenda; a Le Pen presidency would be more likely
to be frustrated by an uncooperative legislature.
Scenario 1: Macron victory with single-party
majority
La République En Marche (LREM)'s ability to implement its
economic program will be highly dependent on the composition of the
577-seat National Assembly. A stable majority for LREM in the
National Assembly would enable Macron to implement most of his
economic platform and other policy priorities, such as labor market
reforms including the streamlining of unemployment benefits,
without major hindrance from parliament. Macron would maintain a
clear pro-EU stance and focus on further increasing France's
influence on the bloc's decision-making, particularly by
strengthening defense co-operation, taking a leading role as the
bloc's major military power.
However, it is also likely that some of Macron's more
contentious planned reforms, such as the increase in the pension
age, would be scaled down as a means of mitigating the risk of
trade union strikes and protests, which led to the paralysis of
public transport for several weeks in late 2019 in opposition to
Macron's first attempt at overhauling the pension regime.
This scenario would not trigger a revision of our economic
forecasts for France as our baseline assumes a continuation of the
current policies. However, we still expect a Macron government to
be ready to use fiscal policy to support the economy if deemed
necessary, even if this implies missing the deficit-reduction
targets agreed with the EU.
Scenario 2: Macron victory with two-party
majority
Former president Nicolas Sarkozy's endorsement of Macron ahead
of the second round, along with Pécresse's backing, increases the
likelihood of an LREM- LR (Les Républicains) coalition, should LREM
fall short of a significant number of seats to secure a majority.
Such a coalition would be likely to maintain a firm pro-EU
position, advance labour market streamlining, and implement the
energy transition strategy aimed at achieving France's
carbon-neutrality goal by 2050, investing in the expansion of
nuclear energy production. However, LR MPs would be less likely to
support the construction of new wind farms. LR MPs would be likely
to back an increase in the retirement age as part of the pension
reform, which was also one of the elements proposed by LR
presidential candidate Pécresse.
Scenario 3: Macron victory with multi-party
coalition
Agreement on certain tax cuts (e.g., on production taxes) would
be likely under a multi-party coalition. However, consensus on
contested policies such as the pension reform or changes to the
labor market regulation would probably remain difficult to reach,
raising the likelihood that crucial elements of Macron's electoral
program, particularly the pension overhaul, would be passed by
decree, as was the case in 2020.
Scenario 4: Le Pen victory with single-party
majority
A victory for Rassemblement National (RN) would alter France's
dynamics with other major EU member states such as Germany, with
which Le Pen intends to end defense co-operation. Although Le Pen
has moved away from her pledge to take France out of the EU, many
of RN's proposals, such as restricting social benefits for French
citizens and unilaterally reducing France's contribution to the EU
budget, entail a Eurosceptic stance and are not in line with EU
law. Should these policies be pursued, France's relationship with
the EU would be likely to deteriorate, making consensus-building in
the bloc, for example on the renegotiation of the EU's fiscal
rules, significantly more difficult.
A victory for Le Pen in the second round of the presidential
election would also have wide-ranging implications for France's
economy. RN's protectionist policies would be likely to lead to a
deterioration of France's investment environment, resulting in
weaker growth compared with our baseline projections. The proposed
increases in social spending and tax cuts on energy would be likely
to drive a widening of the fiscal deficit in 2022, which would most
likely persist throughout Le Pen's mandate. However, it is likely
that some of the tax and spending proposals included in RN's
manifesto would be watered down to limit some of the negative
market reaction following the election result. An RN victory would
be likely to have a negative impact on French equity and bond
prices.
Scenario 5: Le Pen victory with two-party
majority
If the support of Zemmour's R! and Nicolas Dupont-Aignan's
Debout la France (DLF) fails to bring RN enough parliamentary
seats, a robust performance by LR in the legislative election would
increase the likelihood of RN attempting to form a coalition with
this party. However, policy divergence over long-awaited reforms
such as that of the pension system and the labor market would
probably slow down their implementation and require changes to
initial electoral proposals. Failure to agree on a compromise
within the coalition would be likely to lead to the defection of
more moderate MPs from LR, who would most likely join LREM's
parliamentary group, or to LR deciding to pull out of the
coalition, depriving RN of the majority required to continue to
govern. Overall, it would be difficult for RN to secure a stable
coalition, given the party's protectionist market policies.
Scenario 6: Le Pen victory with multi-party
coalition
Under this scenario, RN would find it difficult to implement
large parts of its economic platform and there would be an elevated
risk of policy stalemate. Le Pen's RN would most likely attempt to
form a coalition with Zemmour's R! and Dupont-Aignan's DLF, both of
whom backed Le Pen after their elimination in the first round.
These coalition partners would probably support Le Pen's referendum
on constitutional changes regarding restrictions to immigration, as
well as Le Pen's Eurosceptic stance. Should their combined votes be
insufficient to form a majority in parliament, RN would probably
approach LR for a coalition agreement, although such an arrangement
remains unlikely. LR's presence in the coalition would be likely to
mitigate Eurosceptic policies. However, its support would probably
be conditional on the government's compliance with EU law.
If Le Pen were to fail to form a coalition following the
legislative elections, this would increase the probability of
cohabitation with a prime minister from a different party, such as
LR; a stalemate would raise the likelihood of Le Pen dissolving the
National Assembly and calling a fresh election.
Posted 20 April 2022 by Bibianna Norek, Research Analyst, Europe & CIS, Country Risk, S&P Global Market Intelligence and
Diego Iscaro, Senior Economist, Europe Economics, S&P Global Market Intelligence
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
