Emmanuel Macron’s move to call snap elections following his party’s poor performance in the European Parliamentary elections caught everyone off-guard, apparently including some of his closest advisers. Was his call to dissolve the legislature and hold new elections in just three weeks’ time another illustration of his famous “imperial” style and alleged narcissism, a miscalculation of epic proportions—or something else?
To explore the method behind the madness, we spoke with Dr. Catherine Fieschi, a leading expert on French politics and European populism, visiting fellow at the European University Institute and the author of Populocracy: The Tyranny of Authenticity and the Rise of Populism .
Fieschi, a former advisor to the Macron team, is not only deeply knowledgeable on the intricacies of the French political system, she is well-acquainted both with Macron and with the aims of the French far right. Her insights were fascinating (click here to request a recording of the discussion.)
The “exam questions” we set ourselves for the conversation were the most likely outcomes in the legislative elections, given the unpopularity of Macron’s government, and the likelihood that the vote could trigger a sequel to the Eurozone crisis. With the first round of voting taking place this Sunday, June 30th and Macron’s party trailing in 3rd place behind the far-right RN (32-35%) and the Left Bloc that includes a radical populist left and more moderate social democrats (28-29%), with just 18-19%, financial markets are pricing in a hung parliament scenario and expecting the RN to be the largest party in the French parliament. There is also an emerging narrative that the RN will moderate once it moves from opposition to government, similarly to Italy’s Giorgia Meloni.
What observers may not be appreciating is Macron’s logic—forcing a possible governing coalition even if his party is in third place by making the most of the electoral system. According to Dr. Fieschi, if his party can be the third option, in as many three-way races as possible, for the second round of the election on July 7th , this will serve to reinforce the sanity of his centrist party. The hope is that he may then gather sufficient seats to be the centre ground toward which other moderates can converge and govern. This is the outcome that Macron is betting on—high-risk though it is. Furthermore, Macron is also laying a trap for the opposition by forcing a sort of “controlled explosion” that would last for a year, because in 12 months’ time he has the prerogative to call another legislative election.
Are we Misreading Macron?
“It’s not the suicide mission” it looks like.
Viewing time: 2.24 minutes
This is a point I have not seen made before. It does not put one’s mind at ease to hear that populist-driven political chaos in the EU’s second-largest economy might last only one year, and in any case, financial markets would certainly punish fiscal misbehaviour. But the political logic of “lancing the boil” of populism ahead of when presidential elections are due in 2027 at least makes sense.
Macron will be betting that French populists will perform poorly in office as their compatriots have elsewhere, being better at highlighting and exploiting grievances than governing, and soon find themselves booted out, leaving him as the beneficiary. This is certainly a tall order but at least the maths of the complex French system do make it a more “plausible hypothetical” scenario than it might appear from a distance.
In terms of the near-term outlook, given the fast-approaching Paris Olympics in July and the historic French propensity for protests and civil unrest, Dr. Fieschi underscored that a strong performance by the far-right RN would likely prompt large-scale popular protests, especially from the suburban banlieues, home to a high concentration of immigrants and who have been courted by the populist left leader Melenchon.
Protests may turn violent as has often been the case, and there is the risk that marginalised young people will be “weaponised” by the far-Left. The government--and indeed the RN, if it performs well as expected in elections-- will, however, be at great pains to minimise the disruption. The RN will want to demonstrate that it is a political party that can govern, and this imperative may drive negotiations in the parliament to maintain calm.
While the weeks ahead look tense indeed for France, the view of Martyn Brush, co-Principal of Fordham Global Foresight and a former CRO and derivatives trader, is that although there is significant headline risk ahead, long-term market participants will likely be nervous but remain resilient, especially after the dust settles after the initial result and the implications are digested.
Macron will stay on as president regardless of the legislative election outcome, and though a hung parliament would clearly constrain his room for manoeuvre, this is quite limited as it stands.
Markets however, do not appear to have the potential for a second election in their current calculus. This could prove to a be another ‘unexpected’ event. Should Markets start to include this next Macron ‘roll of the dice’, or become worried by Macron’s ability to control the likely French political chaos, then we believe that French equity and bond Markets will see a greater number of illiquid moments over the next 12 months. Unfortunately, these can become a self-perpetuating cycle. This is bad news at the heart of Europe.
The Macron Gambit is, in other words, risking one year of controlled political chaos in exchange for stronger odds of several more years in power.
We hope to convene another call after the second round of elections on July 7th, so do send us your questions and key themes of interest in the meantime.
A bientot,
Tina
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