Markets were in a celebratory mood this morning, perversely, some were portraying the result of the French Presidential election as bad for Brexit Britain: but the markets are suffering from a severe case of over complacency.
We now know that Emmanuel Macron is going to be the 11th president of the French Fourth Republic. He won by a landslide. The markets sort of loved the result, they didn’t go out and buy so much – although the euro did rise to a six-month high – because the markets had already assumed that Mr Macron was going to win, and had bought accordingly. The Macron rally had already occurred.
Depending on your own politics, you may or may not be celebrating the defeat of Le Pen. But what is clear, is that the views espoused by Le Pen are not supportive of the liberal tradition we have become used to in western Europe. There is much that divides the Tories and Labour party in the UK, but they share certain common ground related to the ideas of international collaboration, anti-isolationism, and are supporters of racial, religious and sexual tolerance. These are not ideals that Marine Le Pen apparently subscribes to. Many people in the UK find the ideas of her party abhorrent.
Yet this morning, some media were hailing the victory of Macron as a disaster for Brexit Britain, have we really stooped so low as to react in horror when the forces of extremism are defeated?
Mr Macron is vehemently pro-EU, he is in favour of globalisation. Although he came to this election as an outsider, having never been elected into office before, and indeed he is the youngest French President since Napoleon, he is very much part of the establishment. He went to the right schools, and universities – Paris Nanterre University and completed a masters in public affairs at the Sciences P0 Paris Institute of Political Studies).
But the French economy has major problems – unemployment is at 10 per cent, youth unemployment is at 24 per cent, public debt is approaching 100 per cent of French GDP.
French productivity is at a level that the UK can only envy, but it all very well having a work force that produces a high level of output per hour, if it doesn’t work many hours.
Is the problem in France the 35-hour working week? Or maybe it is just too hard to fire people, and high taxation is killing incentives.
When Marine Le Pen’s father stood against Jacques Chirac in the French election, he secured just 17.8 per cent of the vote in the final round – against 82.2 per cent for Chirac. This time around Macron is on course for winning 65.8 pent of the vote, Marine Le Pan 34.2 per cent.
The markets are happy because Macron’s win is so decisive, but the French National Front has almost doubled its vote.
The next French election is in five years’ time – this is the election that Le Pen says she has a real hope of winning – if she can double the vote gain, she will have done it. And if the markets’ analysis of what a Le Pen victory would mean is right, then this would be bad for the economy.
The markets are way too complacent.
France needs reforming – that is clear but Messrs Hollande and Sarkozy promised reform and did not deliver.
It is highly unlikely that Macron’s party En Marche will win a majority in the June Parliament election in France. Mr Macron will have to form coalitions – maybe that is what France needs – maybe an alliance of the French centre right and centre left is the way reforms can be brought in.
But it is clear, that for those who believe in a more liberal form of government, Macron has to deliver, because Marine Le Pen, President of Franc in 2022 is a very real possibility.