France: How dangerous is Le Pen for Macron

EZ - Is the mood among service providers continuing to rise?

Next week (June 23), a first flash estimate of PMI data for the Eurozone, Germany, and France for June will be published. Already in May, sentiment in the services sector improved substantially, by 5 index points. In contrast, sentiment in manufacturing stabilized at historic highs.

Against the backdrop of rapid vaccination progress in the countries of the Eurozone, with around 50% of the population having received at least one vaccination dose by mid-June, we expect sentiment in the services sector to rise further in June. In manufacturing, we expect sentiment to stabilize at best near historical highs. Thanks to sustained opening steps in the services sector in many Eurozone countries, we expect a dynamic recovery of the Eurozone economy also in the further course of the year. Private consumption, in particular, should make an above-average contribution to this recovery. In the second half of the year, GDP growth, especially in Greece, Portugal, Spain, and Italy, should additionally benefit from the first funds from the EU recovery plan.

FN – How dangerous is Le Pen for Macron

The first round of regional elections will be held in France's 18 regions on Sunday (June 20). The elections are considered an important yardstick for the presidential elections in April 2022, which is why they will attract considerable media interest. The party landscape is characterized by a strongly fragmented - and thus weakened - left-wing and right-wing conservative camp. On the other hand, there is a strongly united Rassemblement National (RN for short - formerly Front National), which is expected to head some regional governments for the first time after the election. President Macron's party (La Republique En March - LRM for short) is strongly focused on Paris and hardly anchored in the regions, which could also benefit the RN.

Reactions on the financial markets will probably only occur in the run-up to the presidential elections in 2022, where a duel between President Macron and Le Pen is expected, as in 2017. Le Pen has changed course with regard to her party's core issues following her election defeat in 2017. On one hand, she deviated from her strongly EU-critical course and refrained from both a return to the franc and an exit from the EU. On the other hand, environmental protection was increasingly included in the election program. A change of direction which - together with the renaming of the party - should serve to position it more strongly in the more moderate conservative camp. The success of the strategy is already evident in the fact that Le Pen's acceptance has risen sharply; 42% of French people no longer see the RN as a danger to democracy.

As a counter-reaction, the LRM around Macron is trying to move further to the right in order to position itself more strongly in the conservative camp; issues such as security, order, and social conditions in the suburbs are being emphasized more strongly. At the same time, Macron is trying to focus the election campaign on a duel with Le Pen, hoping that he will be able to prevail against her again in a run-off. Polls currently put Le Pen at 29% and Macron at 28% in the first round of the 2022 election. However, in the event of a run-off election, pollsters expect Macron to win again, even if this could be less clear-cut with 53% approval (after 66.1% in 2017). In contrast, Le Pen could achieve a clearly better result in the run-off with 47% (after 33.9%).

The increased uncertainty regarding the outcome of the election could temporarily lead to increased demand for safe-haven investments such as German Bunds or the Swiss franc in the run-up to the presidential election (April 2022). The extent of the price movement on the financial markets will strongly depend on Le Pen's expected election success, based on ongoing poll results. In addition, the question of how credible Le Pen's change of course (turning away from an anti-EU course) is seen by the financial markets will be decisive. 

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