“Definitely unrest in the markets”
Economists: Le Pen win would shake stock markets
04/08/2022 10:59 am
A few days before the presidential election in France, a neck-and-neck race is emerging. In the polls, incumbent Macron and his rival Marine Le Pen are separated by just a few points. Should the right-wing populist win the runoff, top economists expect a stock market tremor.
Leading economists expect a stock market tremor if the right-wing populist candidate Marine Le Pen wins the presidential election in France. “If Le Pen were to win, this would result in turbulence on the financial markets,” said Lars Feld, personal economic advisor to Federal Finance Minister Christian Lindner and former head of the Economic Wise Men. “There is no telling what this would do for stability in the euro area.”
Ahead of the first round of voting in Sunday’s presidential election, pro-European incumbent Emmanuel Macron is just a few percentage points ahead of his rival Le Pen in polls. A close race between the two is forecast in a runoff election expected on April 24.
Should this happen, “we will definitely get unrest on the markets,” said ING chief economist Carsten Brzeski. “Because unlike five years ago, according to the polls, Le Pen would have a better chance of winning against Macron.” Even if Le Pen presented himself more moderately in the election campaign and no longer played on issues such as a “Frexit” – i.e. a departure from the EU based on the British model – the markets should become restless. “Means: higher yields on French government bonds, a slightly weaker euro and slight losses on the French stock markets,” said Brzeski.
Le Pen rejects sanctions against Russia
The Commerzbank chief economist Jörg Krämer sees it very similarly. “Although the financial markets are expecting Macron to win, they are concerned that Le Pen is catching up in the polls,” he said. “Because Le Pen would weaken the position of the EU and NATO at a time when unity with Vladimir Putin is more important than ever,” said the economist, referring to Russia’s war of aggression against Ukraine.
Unlike in the previous election, Le Pen is no longer demanding that France should leave the EU and NATO. “But she is critical of both institutions. She also rejects sanctions against Russia.” A strong second place finish in the first round of the presidential election would increase their chances for the second, decisive ballot and weigh heavily on the financial markets.
According to wealth manager Aegon, a Le Pen victory would “increase uncertainty for French growth, inflation and finances”. There is likely to be a drop in European stock markets, particularly the French stock market. A higher risk premium on French government bonds and a weakening of the euro are also to be expected.
The neighbor is the second largest economy in the euro zone after Germany. In 2021, France was in third place after the USA and China in the ranking of the most important German export customers.