French Elections – Importance and Impact


Contributed by: Meera Siva, CFA

National elections can have major influence on not just politics but economic policies, market, currency and investments, globally. The upcoming French election is interesting in what it could mean to the region’s equation and its impact on other countries.

France’s two front-running candidates have different economic policies. Presidential contender Emmanuel Macron is a centrist while far-right leader Marine Le Pen has an anti-euro, anti-immigration platform. The election is held in two stages, with two top contenders picked for the 2nd stage. Polls predict that Macron, a former banker and economy minister in a Socialist government, could beat Le Pen comfortably in the May 7 final round. But the war in Syria and terrorist attacks may change the sentiment and results.

Long dollar, short euro

The fate of the euro is fragile, whether France decides to stay with the EU or leave, said Dr. Bobby Srinivasan – Professor of Finance & Trading, Great Lakes Institute of Management; active trader; author; Professor for well over 40 years. He says that Macron’s win can bring some stability while Le Pen may accelerate the fall. Exit out of euro zone is a long process and Britain may take over 2 years to complete this. Also, the exit option is good for the old who want to keep away outsiders, but it is bad for the young who may find lesser job and education opportunities compared to the past.

After the Global Financial Crisis, Euro was expected to do well and the dollar was weak. The exchange rate was 1.59 USD to euro. Currently, it is just over 1. The concerns involve that of refugee inflows through the euro zone and settling in France. The country’s working hours are low, at 30 per week. India only has a small share of trade with euro (18%), so it may not have a big impact.

Anti-establishment wave

The jitter in the market is also likely due to uncertainties in the result. Dr. Stanly Johny, International Affairs Editor with The Hindu and adjunct faculty at Asian College of Journalism, Chennai notes that the US elections showed that opinion polls can go wrong. Anti- establishment sentiments are taking root and that can sway voter sentiments, he says. Netherland, for example, saw an increase in freedom party’s vote share. The unemployment rate is high (10%) and youth unemployment rate is staggeringly high (25%). Growth is sluggish, there are issues of terrorism with many fatal incidents and there is need to spend; immigration has been a hot-button issue. So sentiments of France first, anti-globalisation and no immigration – the same script that worked for Trump in the US, may find emotional appeal.

Too big to hold

The idea of euro was probably a shaky one, as it is hard to manage the needs and issues of so many countries, noted K Suresh, President/CEO/CFO India Cements Capital, with over 28 years of experience and a regular guest on Sun News TV Channel’s live program on the securities market. Data shows that there has not been economic progress in France over the last few years. France contributes 1/5th to the euro and in the EU it has 15% voting power.

EU also needs to think of their alignment with Russia as they depend on them for natural gas supply. A leader with more alignment with Russia can be good. France’s exit from EU will further weaken euro’s strength, but bad policies of France may also impact the currency.


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