Fitch: French election reduces political risk; challenges ahead

In its recent report following the French presidential election outcome, Fitch Ratings argued that the victory of Emmanuel Macron over Eurosceptic Marine Le Pen in the presidential election, with around 66% of the vote, removes the risk of a near-term severe political shock to France and wider Europe.

Key quotes:

• The result supports our assumption that France will remain a member of the EU and eurozone, in line with our expectations when we affirmed France's 'AA'/Stable sovereign rating in March
• The next key political event is elections for the National Assembly on 11 and 18 June
• A recent poll by OpinionWay-SLPV Analytics for Les Echos suggests that EM could secure the largest parliamentary position (249 to 286 seats), just short of the 290 seats required for an absolute majority
• The presidential election also highlights the sense of disillusion among many French voters, with 48% of the first-round electorate supporting anti-EU candidates, and a relatively low turnout compared to previous final-round elections (estimated at 74.6%, while 11.5% of ballots were blank or void).
• President-Elect Macron's stated commitment to reducing the budget deficit to below 3% of GDP (from 3.4% in 2016) suggests that he will strive to meet the European Commission deadline for closing the "excessive deficit" from this year