Investment Institute
Market Updates

France: political uncertainty to persist

KEY POINTS
The left alliance NFP secured c. 180 seats in the National Assembly – still far from the majority threshold – the centrist Ensemble came second with c. 168 and the far-right RN third with just 143, well below poll projections.
None of the most radical macroeconomic platforms tabled during the campaign has a realistic chance to be implemented. But the new problem is how a three-way split can be pulled into a workable government.
Most concerns and a likely timetable for resolution focus on France’s budget and fiscal outlook. With France facing an Excessive Deficit Procedure, a new government must deliver a budget adhering to EU rules by early October.
The path forward is uncertain, France having no history of this type of coalition. We expect several trial-and-error attempts at a solution but think a short-term government with limited mainstream agenda is a likely outcome.

The surge in the Rassemblement National (RN) in the European elections continued into the first round of the national elections: the far-right party came out first in 297 constituencies. The second-round brought however a very sharp correction. Not only did the RN fail to achieve the outright majority that it had hoped – although we suggested looked unlikely after the first round – but it fell well short of other groups, coming in third with just 143 seats, below Macron’s Ensemble that recorded c.168 seats (down heavily from 245 in 2022) and the Nouveau Front Populaire (NFP) – the left-wing alliance – that came first with c.180 seats (there is still some margin around the numbers per party since deputies have until 18 July to declare their affiliation to a parliamentary group).


The “Republican tradition” is that the President of the Republic appoints someone from the biggest group in parliament as Prime Minister, although it is not a constitutional obligation. NFP is using this tradition to claim the job, with internal jockeying among the various components of the alliance, which ranges from the radical La France Insoumise (LFI), probably the biggest caucus with NFP once deputies declare their affiliation, to historical government parties (Socialists, Communists and Greens). Arithmetically, a “NFP-only” government, implementing the alliance’s radical economic platform, would have almost zero chance of survival, since all the other groups would have the numbers to force a NFP Prime Minister to resign by voting a motion of no confidence.

Download full article
Download report (308.4 KB)

Subscribe to the weekly CIO views

SUBSCRIBE NOW
Subscribe to updates.

    Disclaimer

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.

    Back to top
    Are you a Professional Investor ?

    This website is available in English only and directed at professional, institutional or qualified investors. It is not suitable for retail investors. As such, some of the funds, products and services described on this website are not available for retail investors under the MiFID II (Directive 2014/65/UE). By pressing accept you confirm that you are a professional investor and agree to AXA Investment Managers' Legal Information and Terms of Use.