“Marine Le Pen, what if? » Tuesday, April 12, John Plassard, director and investment specialist of the Swiss bank Mirabaud, met international investors with a presentation entitled “What happens if Marine Le Pen wins? The document reviews the consequences for the French economy and the financial markets of a victory for the candidate of the National Rally (RN) in the presidential election on April 24. “In 2002, no one would have asked the question “what if Jean-Marie Le Pen?”, and, five years ago, after the debate between the two rounds, no one was betting on a victory for Marine The pen. The situation is different today.” notes John Plassard.
Until the beginning of April, the outgoing president’s comfortable margin in the polls had left the French election under investors’ radars. But, a few days before the ballot, the rapprochement in the polls between the two favorites, Emmanuel Macron and Marine Le Pen, began to worry the Parisian place. The flagship CAC 40 index of the Paris Stock Exchange fell and, as a sign of nervousness, the difference (the “spread”) between French and German interest rates on the ten-year maturity increased.
This yield gap between French and German debt (whose signature is considered the safest) measures the level of investor confidence in the tricolor economy, in the government and in debt management. However, the Franco-German “spread” increased the week preceding the first round of the election, to reach 57 basis points, an unprecedented level since the stock market crash linked to the Covid-19 pandemic in 2020. This spread of rate between France and Germany had only averaged 33 basis points for five years, and even 19 basis points in January 2021.
“The risk of the end of Europe”
Finally, Emmanuel Macron’s first round score, better than expected, reassured investors, the “spread” having fallen to 49 basis points, Wednesday, April 13. The financial markets have “almost evacuated the French presidential election. We are in a Brexit moment: they do not believe at this stage in the election of Marine Le Pen”, analyzes Jean-François Robin, global head of research at Natixis CIB. The boss of a French bank notes, for his part, “a certain feverishness among investors, because Emmanuel Macron’s lead remains fragile”.
Why do the markets fear a victory for the far-right candidate? In his presentation, John Plassard points out that Marine Le Pen’s program lists many “economic commitments, some of them precise, but without costing and without an idea of how to finance them. We believe this, along with anti-EU proposals, could destabilize financial markets.”.
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