The right-wing populist RN is on the brink of potentially gaining an absolute majority in the French parliament. Financial markets were relieved that the left-wing alliance did not win more votes. The victory of the right-wing populist RN in the first round of the French parliamentary elections was met with a positive response by the stock markets, with the European common currency, the euro, also gaining strength.
The euro climbed above the 1.0750 dollar mark against the dollar and also rose against the franc. European stock markets opened positively on Monday morning, with the French stock market index CAC-40 recording significant gains by the afternoon. Shares in French banks also saw strong gains, with Société Générale and Crédit Agricole shares rising.
The RN won with 33.2 percent of the vote, putting them in a position to become the strongest force in parliament. However, it might fall short of an absolute majority of 289 seats. President Macron’s camp and the left-wing New Popular Front alliance have announced plans to prevent an absolute majority for the RN in the second round of parliamentary elections on July 7th.
There are concerns about both sides’ spending policies, but financial market players are relieved that they didn’t win more votes as it would have led to increased uncertainty about French public finances among investors beforehand. A coalition without an absolute majority is seen as a good scenario for financial markets by economists as it minimizes political risks and maximizes stability in France’s economy and foreign policy direction.
In summary, if no coalition wins an absolute majority in next Sunday’s second round of parliamentary elections, then France may remain with its current government or a technocratic government will be installed which could impact public finances and foreign policy decisions going forward.