French equities faced pressure as the Paris Bourse declined by 1.4 per cent early on June 14 as investors expressed wariness amid a growing political crisis.
The CAC 40 index has plunged 4.88 per cent since June 10 following the unexpected dissolution of the National Assembly and French President Emmanuel Macron’s June 9 call for snap national elections.
According to Le Capital, a French financial news site, the CAC 40 was on track for “its worst week since June 2022”, reflecting heightened market volatility due to the political turmoil.
The euro fell broadly, while French bonds and stocks were hit hard on June 10 following French President Emmanuel Macron’s decision to call a snap parliamentary election. https://t.co/nOf1HOGcjS
— Brussels Signal (@brusselssignal) June 10, 2024
The shock general election announcement has caused uncertainty in the market, unsettling investors as the future fiscal policies remain unclear.
Latest polling suggests that Macron’s Renaissance party may lose the vote on June 30, potentially becoming a minority in the French Assembly.
If these predictions hold, the potential installation of the National Rally (RN) or a left-wing coalition as the major government power raises questions about France’s economic direction.
Both the RN and the left-wing advocate for increased public spending and repealing Macron’s pension reform.
The left-wing coalition’s economic policies included “raising the minimum wage to €1,600 net” and “rejecting of the austerity constraints of the European budget pact”.
RN is in favour of cutting taxes. RN President Jordan Bardella said on June 14: “As Prime Minister, in the very first weeks, I will reduce VAT on energy – fuels, heating oil, electricity, gas.”
That came amid previous projections by the International Monetary Fund that France’s public debt was headed higher.
The IMF has challenged the French Government’s projections on future public debt, estimating that the country will end up running a significantly higher deficit than Paris is predicting. https://t.co/i9ZHAMGowY
— Brussels Signal (@brusselssignal) May 24, 2024
France’s finance minister Bruno Le Maire recently commented on the situation, stating that the electoral uncertainty “raises questions in a context where France should be embarking on a trajectory to consolidate its public finances”.
In April, the government had announced budget cuts.
Le Maire criticised the left-wing and RN policies, describing the latter’s programme as “a big mess”.
He further warned that the left-wing coalition’s agenda could potentially lead to France’s exit from the European Union.
“This falsely generous Left is in fact preparing for widespread impoverishment,” he said.
A few days earlier, Moody’s rating agency had described rising political instability in France as a “credit risk”.
After decades of spending beyond its means, France must soon show how it will avoid a budget crunch that is putting its credit ratings at risk and could even lead to the downfall of President Emmanuel Macron’s government. https://t.co/TtjcL4kEIr
— Brussels Signal (@brusselssignal) April 10, 2024
