Popular delusions, the madness of crowds and French Politics - Westpac
Tim Riddell, analysts at Westpac gave an overview of the French election below and explained that the concerns about a potential Le Pen (National Front) Presidency appear overstated.
Key Quotes:
"Overview
Are French Presidential Elections throwing Europe towards an existential crisis?
The quick answer is no.
Summary
We provide an overview of the French election below. Concerns about a potential Le Pen (National Front) Presidency appear overstated.
Persistently low growth, migrant concerns, the rise of populism and growth of the far right are music to the ears of euro-sceptics. However, the French constitution and political system have been designed to crimp the potential of extremists gaining power.
The French Assembly (Parliament) holds the real power. Its first past the post system of electing members favours the mainstream over populist movements.
A pro-EU/Euro President with a Republican led Assembly is the most likely of outcomes.
However, until that becomes clear, volatility and risk aversion may develop. Rather than push the EU and Euro towards an unravelling, any extreme widening of spreads and EUR sell-offs should provide opportunities to position for more mainstream outcomes (with subsequent narrowing of spreads and rebounds in EUR).
The elections are likely to be more a source of interest rather than impact for Westpac’s core markets. Systemic or contagion risks spreading towards Australia and New Zealand through intensified risk aversion are unlikely.
The Electoral system key dates
- 1st Presidential ballot on 23 April 2017
- 2nd Presidential ballot on 7th May 2107
- National Assembly election on 11th and 18th June 2017
- 3 key issues:
The French President has NO real executive powers within the constitution.
Power lies within the Assembly. Without its support a President has little power.
The French election cycle has barely started and will really kick off from mid-March.
It should be noted from the outset that checks and balances within the French constitution make it unlikely that an extremist will be elected. Even if that were to occur, an extreme. President would have little ability to influence policy or government given the systems bias to reduce the impact of extreme parties within the Assembly."