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Macro Flash: France
We don’t expect major impact of French elections before June
Analyser
We don’t expect major impact of French elections before June
French elections: the surprise is more the lower than expected score for François Hollande. His victory is hardly surprising
given that none of the polls had Nicolas Sarkozy as the winner. Note the following two points, however:
- the gap between the two candidates is narrower than expected. This keeps up the suspense about the outcome of the
legislative elections, which alone will really give François Hollande the ability to (or prevent him from) implementing the
measures that he has promised. Polling organisations will now be able to give their all to assessing the theoretical makeup
of the National Assembly, including based on the local results of the first and second rounds. Note, however, that the main
focus will be the standoff between the UMP and the Front National, as the left-wing and green parties seem more willing to
work together (in any case the Socialist Party and the Greens), and particularly the willingness, or otherwise, of the UMP to
sacrifice a few seats to the Front National to avoid being up against both the left and the Front National in the second round.
The progress of discussions between these two parties is therefore worth watching. Note Marine Le Pen seems little inclined
to withdraw her candidates at this stage, in a logical standoff.
- François Hollande gave a particularly rallying first speech as President aimed at the legislative elections in June (the
handover of power could take place next Monday).
Aside from setting job creation through re-industrialisation as the key objective of his future policies, he above all: 1/
described reducing France's deficit's as his second priority; 2/ avoided any reference to the world of finance, which he has
hitherto referred to as his "enemy", and 3/ placed the redirecting of Europe towards job creation and growth at the bottom of
his list of priorities, developing this point further, however, and confirming that this issue would guide his first actions as
French President, particularly with regard to the European partners.
It is worth noting: 1/ that an initiative aimed at the European partners straight after the elections is a skilful move as François
Hollande will not have control over Parliament until at least mid-June, so why not do as much as possible in the meantime...
; 2/ that he is considering send European leaders a draft memorandum on growth by the end of May, i.e. before the meeting
on this issue planned by Herman Van Rompuy for the start of June, and above all before the European Summit at the end of
June. Note, however, that we are not expecting François Hollande to fundamentally call into question the Stability Pact
agreed to by European leaders in March, instead we believe that he wishes to add to it, a process that the Germans
confirmed yesterday evening that they were involved in.
Ultimately, François Hollande seemed to want to rally the French people as much as possible, showing a very proactive
approach (is this credible?) to the issue of growth, and above all voluntarily avoiding taking issue with the world of finance,
which he will need tomorrow to buy French debt. The narrowing of spreads between French and German long-term
sovereign bond rates indicates that investors are aware the new President only has tiny room for maneuver,
forcing him to implement credible political measures, especially on the fiscal front. It will nevertheless be
necessary that such balance between austerity and growth is carefully monitored by the new government for this
to be lasting.
Also note the main measures announced by the socialist candidate during his campaign:
- "Renegotiation" of the European treaty
- 60,000 teaching posts, 150,000 jobs for young people, Generation contract
- Retirement at 60 for those who have contributed for more than 41 years
- Ring-fencing of banking activities
- Elimination of stock options and regulation of bonuses
- 15% increase in the taxation of bank profits and a tax on financial transactions
- 75% to 50% reduction in nuclear's share of electricity generation
- Raising of wealth tax on the largest estates
- 45% income tax bracket, 75% bracket for the highest earners
- Corporation tax according to company size
- Creation of a public investment bank
- Closing of the equivalent of EUR29bn in tax loopholes
- Freezing of the price of fuel for 3 months at the start of the mandate.
Author(s): Full Name Ph: Email:
François Duhen +33 1 45 96 79 42 francois.duhen@cmcics.com
Benoit Rodriguez +33 1 45 96 81 56 benoit.rodriguez@cmcics.com
Camille de Williencourt +33 1 45 96 77 31 camille.dewilliencourt@cmcics.com
Page 8 of 80 European Securities Network
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