French and European markets fell on Monday in the wake of President Emmanuel Macron’s shock decision to call snap parliamentary elections after his centrist alliance was trounced by Marine Le Pen’s far-right movement in the European parliamentary vote.
A sell-off in French stocks and bonds dragged down European-wide indices as investors reacted to political instability and the possibility of a far-right government.
By Monday afternoon, the country’s Cac 40 stock index had fallen 1.5 per cent to its lowest since February, with banks and utilities hit particularly hard.
Le Pen’s Rassemblement National (RN) secured 31.4 per cent of the vote compared with 14.6 per cent for the French president’s centrist alliance, a stinging blow to Macron. He only narrowly avoided a humiliating third place behind the centre left, which took 13.9 per cent of the vote.
“For me, who always considers that a united, strong, independent Europe is good for France, this is a situation which I cannot countenance,” Macron said. “I have decided to give you back the choice of our parliamentary future with a vote.”
Investors sold French government debt, with the yield on the benchmark 10-year bond, which moves inversely to price, up 0.11 percentage points to 3.22 per cent.
The region-wide Stoxx Europe 600 lost 0.4 per cent, Germany’s Dax fell 0.5 per cent and London’s FTSE 100 dropped 0.3 per cent. The euro was down 0.4 per cent against the US dollar at $1.076.
The first round of France’s parliamentary elections will be held in just three weeks, on June 30, with a run-off on July 7.
The dissolution is an extraordinary gamble by Macron who has already lost his parliamentary majority after winning a second term as president two years ago. His alliance could be crushed, which would force him to appoint a prime minister from another party, such as the centre-right Les Republicains or even the far-right RN, in an arrangement known as a “cohabitation”.
In such a scenario, Macron would be left with little power over domestic affairs with three years left as president.
Macron said he believed a vote was needed to calm the volatile debates in the French parliament and achieve clarity on the direction of the country. Élysée officials said he had been considering it for some time to address gridlock in parliament.
François Bayrou, a centrist politician whose party is in alliance with Macron, said the president was aiming to “end the impasse” in politics by asking voters a simple question of “whether France really recognises itself in the proposals of the far right”.
Le Pen celebrated the victory and hailed Macron’s response to it. “This shows that when the people vote, the people win,” she said in a victory speech. “I can only salute the president’s decision to call early elections . . . We are ready to exercise power if the French give us their backing.”
RN has 88 seats out of 577 in the National Assembly, making it the biggest opposition party. Macron’s centrist alliance has 249, so has had to cut deals with other parties to further his agenda.
There have been three previous political cohabitations in France — where a president has to share power with a prime minister and government from an opposing party — since the Fifth Republic was founded in 1958.
Alain Duhamel, a veteran political analyst, predicted: “A dissolution means a cohabitation.”
In addition to the RN’s big win in Sunday’s European elections, another far-right party, Reconquête, was estimated to have won 5.3 per cent of the vote.
The margin of victory could lend huge momentum to Le Pen’s ambition to succeed Macron as president in 2027. The decision to call snap elections was presented by people close to the president as a high-stakes attempt to thwart her advance.
“This is a severe defeat for Macron given that he has been president for seven years and he has long said his goal is to combat the far right,” said Bruno Cautrès, an academic and pollster at Sciences Po in Paris.
The loss came after Macron had argued that the future of the EU was at stake because of Russia’s aggression against Ukraine, economic competition with the US and China, as well as the need to fight climate change — all topics on which he said the far right could not be trusted.
Yet the message did not move French voters, who have historically used European elections as protest votes against the incumbent president.
“Given that Emmanuel Macron has sought to position himself as the intellectual leader of Europe, the fact that French voters don’t follow him is problematic for him,” said Cautrès.
Voting estimates showed the RN’s list, led by the charismatic 28-year-old party chief Jordan Bardella, had won almost as many votes as the combined total of Macron’s alliance, led by a little-known MEP Valerie Hayer, and the traditional parties of the centre right and centre left.
“In according more than 30 per cent of their votes to us, the French have delivered their verdict and marked the determination of our country to change the direction of the EU,” said Bardella in a speech from his campaign headquarters. “This is only the beginning.”
The results show the rising popularity of the RN since 2019 when it won 23.3 per cent of the vote in the last European elections, coming in only slightly ahead of Macron’s list which took 22.4 per cent.
Additional reporting by Adrienne Klasa
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