European Daily: French Presidential Election—A Decisive Moment for France’s Policy Path

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  • Incumbent President Emmanuel Macron will face far-right candidate Marine Le Pen in the run-off for the presidential election this coming Sunday (April 24). Yesterday’s televised debate between the two contenders was seen as somewhat balanced and has yet to shift voter sentiment.
  • The latest opinion polls continue to point to a narrow victory for Mr. Macron over M. Le Pen (with between 53% and 56% of the total vote), with a higher percentage of those who voted for Jean-Luc Mélenchon in the first round now favouring Mr. Macron over M. Le Pen
  • Polls this close to election day have historically tended to be fairly precise for similarly tight races and the scope for a surprise to reverse Mr. Macron’s lead in the polls therefore appears limited. Accordingly, prediction markets have repriced Mr. Macron’s odds of winning higher at 90%, up from 80% last week.
  • If Mr. Macron is re-elected, we would expect him to revive his reformist agenda as a continuation of his pro-integration plan for Europe. These reforms are to a large extent embedded in our current forecasts. Should M. Le Pen be elected, we would expect an institutional impasse owing to the likely lack of a parliamentary majority in next June’s legislative elections and significant friction with EU partners.

French voters will elect their president this Sunday, April 24 (results due at 7:00pm London time). In today’s Daily, we look at the recent polls and discuss the potential policy implications.

Increased Support from Left-Wing Voters Lifts Macron in Polls

President Macron has recently extended his lead in the polls to 55%, leaving him 10pp ahead of Marine Le Pen’s 45% of voter intentions (Exhibit 1, left). This momentum suggests that a higher percentage of those who voted for Jean-Luc Mélenchon in the first round favour Mr. Macron over M. Le Pen, despite an unchanged abstention rate (around 40%) (Exhibit 1, right).

 

Polls this close to election day have historically tended to be fairly precise for similarly tight races (Exhibit 2, left). The scope for a surprise to reverse Mr. Macron’s lead in the polls therefore appears limited. Accordingly, prediction markets have repriced Mr. Macron’s odds of winning higher at 90%, up from 80% last week (Exhibit 2, right).

 

Yesterday’s televised debate with M. Le Pen was widely viewed as the last hurdle to Mr. Macron’s re-election. Unlike 2017, yesterday’s debate was seen as somewhat balanced and has yet to shift voter sentiment. Accordingly, post-debate polls suggest that Macron’s lead over M. Le Pen is intact and his predicted odds of winning ticked up slightly in the morning after the debate.

What Governance Under a Far-Right President?

As we reported recently, both Mr. Macron and M. Le Pen have fine-tuned their policy proposals. As widely expected, Mr. Macron shifted his policy platform slightly to the left, including more ecological measures, to attract supporters of far-left candidate Jean-Luc Mélenchon and the Green party. Meanwhile, M. Le Pen set out her position on governance and Europe.1 Both candidates reaffirmed these policy changes during the televised debate.

In the event Mr. Macron is re-elected, we would expect him to revive his reformist agenda as a continuation of his pro-integration plan for Europe. These reforms are to a large extent embedded in our current forecasts. Should M. Le Pen be elected, we would expect an institutional impasse owing to the likely lack of a parliamentary majority in next June’s legislative elections.

Under France’s semi-presidentialist system, the government responds to Parliament, but the parliamentary majority may not be supportive of the President. In the event of such an electoral outcome, the Prime Minister is given de facto control over the domestic agenda while the President is relegated to diplomatic and military responsibilities. The likely lack of a parliamentary majority would therefore prevent M. Le Pen from controlling the domestic policy agenda, as well as the European one to some extent. To overcome this institutional hurdle, last week M. Le Pen announced her intention to have recourse to a referendum, which the President alone can call for.2

But, as of today, the French Constitution allows the President to call for a referendum only in specific circumstances, and mostly not alone: (a) either to change the Constitution (Article 89), and/or (b) to modify the organisation of public powers, economic, social and environmental policies and the ratification of international treaties. In the event of a ‘cohabitation scenario’ (our base case), M. Le Pen would need the support of the government or the parliament to change the Constitution, or the support of the two houses of parliament to modify policies and/or treaties.

Another option would be to organise a shared initiative referendum (‘Référendum d’initiative partagée’ made possible since July 2008), which requires the support of 1/5 of parliamentary members, backed in turn by 1/10 of registered voters (4.8 million). But such a referendum would be restricted to the three domains mentioned under Art. 11. In her manifesto, M. Le Pen also proposes introducing the option of a referendum initiated by a minimum of 500,000 French citizens (the ‘Réferendum d’Initiative Citoyenne’, RIC), which she reaffirmed during the televised debate. This option would require a change of the Constitution, which in turn would require the support of the upper house in the parliament.

In short, the power of the President to alter both the Constitution and/or the governance of institutions would require the support of the French (upper house) Senate. But this parliamentary assembly—currently dominated by the centre-right Les Républicains party—is likely to stay in place until the terms of all current senators end in 2026.3 This implies that the most likely outcome would be an institutional impasse, preventing M. Le Pen from implementing her domestic and international agenda. By contrast, M. Le Pen, if elected President, would have full power to push back on policy measures for reforms proposed by a government from the opposition and/or the parliament in the likely case of a ‘cohabitation’.

More Frictions with EU partners in the Event of Tail-Risk Scenario

On Europe, M. Le Pen has proposed changing France’s relationship with EU institutions to guarantee and enhance national sovereignty. In particular, she wants to restrict the circulation of goods and people within the single market and re-establish borders with the EU. By opposing these EU fundamental values, M. Le Pen’s policy proposals would imply significant friction with EU partners.

The ability of the President to renegotiate agreed mechanisms (such as NextGenEU) and/or France’s contribution to the EU budget would require the support of the French parliament, which seems unlikely as the centre-right majority in the Senate is unlikely to change before 2026. By contrast, as President M. Le Pen would be in a position to push back on any proposal from the government and/or the parliament to ratify a new agreement or initiative at the EU level. In this respect, she would probably oppose the REPowerEU and a prolongation or extension of the NextGenEU mechanisms.

In short, the French Constitution acts as both a floor and a cap to any changes to European integration that could be enacted by a Eurosceptic president. Although there would be no immediate consequences for the functioning of recently adopted EU initiatives (such as SURE, NextGenEU and the 2021-2027 multi-year EU budget), if elected President, M. Le Pen’s position on Europe would likely affect investor confidence in the effectiveness of these EU programmes. As a result, our markets team would look for a significant widening of sovereign spreads if M. Le Pen were elected President.