Front National gains worry Robeco

Investors can breathe a sigh of relief after the French National Front [known as Front National in French] failed to win control of any regional governments, but its strength is still worrying, says Robeco’s chief economist Léon Cornelissen (pictured).

Tactics by the mainstream socialist party in the second round of polls on Sunday 13 December stemmed the gains that the far-right group made in the first round a week earlier.

The National Front, led by Marine Le Pen, ended up winning no regional assemblies, though it broadly maintained its share of the popular vote at 27%.

Markets had wobbled a bit after the National Front won the first round, with the spread on the 10-year French OAT government widening by two basis points against the German benchmark Bund. Both the bond spread and the euro were unchanged on Sunday’s results.

Anti-NF tactics worked
The strong showing of the National Front in the first round sent shock waves throughout Europe, so there are sighs of relief everywhere.

Tactics by the social democrats worked, withdrawing two candidates in two crucial regions to pave the way for a center-right victory. The turnout was nine points higher compared with the first round; the electorate was confronted with a real threat and so it turned out to counter it.

The National Front subsequently didn’t win any region, so in a way it was a defeat for them. But this strategy can backfire in the longer term, because it’s seen as ‘them against us’. And the rising trend in favor of the National Front remains worrying.

There is still a lot of anti-government sentiment across Europe and tensions are rising against the establishment. One of the drivers is the refugee crisis and you won’t see any bold initiatives to diminish this problem any time soon.

Elections were held in France and its territories for 18 regional assemblies and their presidents, sitting for six-year terms. At stake were 13 regions in mainland France and five in overseas dominions including Corsica and French Guiana.

They are often viewed as a mid-term opinion poll for the French national elections due in 2017. President François Hollande, elected in 2012, is becoming highly unpopular as the economy battles low growth and high unemployment.

Who’s in charge of regions isn’t that important in practical terms, but huge success of the far right would bode ill for the presidential elections. What really counts are the presidential elections, and they are still a way off.

Party de Le Pens
The National Front is run by the daughter of founder Jean-Marie Le Pen, who unsuccessfully stood for the French presidency a record five times. Marine Le Pen is a member of the European Parliament for North West France and a regional councillor for Nord-Pas-de-Calais Picardie.

Her niece, Marion Maréchal-Le Pen became France’s youngest MP in modern political history and was the frontrunner in the glitzy Provence-Alpes-Côte d’Azur, but both women failed to win seats in the regional polls.

Investors fear the party winning power – particularly in national elections – because its policies are primarily anti-immigration, anti-EU and anti-business.

The National Front is against free trade, is for protectionism, wants to reintroduce customs duties, lower the retirement age and raise the minimum wage – which is economic madness of course, but pretty populist among its electorate.

They also want to have an orderly secession from the euro, but of course you can’t leave or dissolve the euro without huge cost. Le Pen wants to get France out of the EU and has promised a referendum on this issue.

A National Front president would be a disaster for France and for Europe. That’s unlikely, but their current strength is worrying.

French economy still weak
And it is still possible that the mid-term protest vote against President Hollande could turn into a real rejection come the elections in 2017.

The French economy remains weak, and much-needed reforms are not being implemented due to popular resistance. The economy took a further hit when tourists cancelled bookings after the Paris terrorist attacks which left 120 dead in November.

France is struggling, and Hollande is a weak president. Of course he has a pro-business cabinet, led by Prime Minister Manuel Valls, but he is hardly employing any initiatives out of fear of the electorate. And you could argue that in the short term, structural reforms won’t help to cut unemployment.

The whole problem with Hollande is he is trying to sit out the country’s problems, with no economic initiatives. Like former President Nikolas Sarkozy, who tried to do something in the pensions sphere and then backed down, there’s a lack of reform.

This kind of passivity being seen in France doesn’t help; you could at least have a government with a program and a sense of optimism which does something with subsidies or whatever else to offer some perspective.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

Read more from Adrien Paredes-Vanheule

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