Inevitable deadlock in French politics… “The general election results that the market feared the most”

Formation of a ‘Hung Parliament’ without a Majority Party in Sight, Leftist Alliance’s Increased Expenditure Raises Fiscal Concerns, Potentially Negative Impact on Financial Markets such as Stocks and Bonds, Macron Sees Possibility of Forming a Coalition, Some Positives, ‘[Seoul Economy]’,
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, ‘With none of the factions securing a majority in the final round of the French election held on the 7th(local time), uncertainty regarding the French economy is escalating. Concerns are raised that the leftist coalition, which has taken the lead party position, may act as a detriment to the French economy as they have pledged substantial financial expenditures.’,
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, ‘According to Bloomberg on the 8th, immediately after the release of exit polls, the Euro dropped approximately 0.3% to $1.0807 compared to the previous day. This drop is speculated to be due to concerns regarding the leftist coalition’s radical pledges. The leftist alliance, the Nouvelle France populaire (NFP), promised to revoke President Emmanuel Macron’s pension reform pushed through after last year’s labor disputes and reduce the retirement age to 60. They also pledged to raise the minimum wage from the current €1,398.69 (approximately 209,000 won) to €1,600 (approximately 239,000 won) and adjust it according to inflation rates. According to the Montaigne Institute, to fulfill the leftist alliance’s pledges would require an additional annual expenditure of €95 billion (approximately 142 trillion won), which is six times the broad fiscal spending and double that of the Rassemblement National (RN).’,
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, ‘Yann Pon Gärigh, Chief Market Analyst at Nordia, stated, “The economic pledges of the leftist camp are much more problematic in many aspects compared to those of the right-wing camp,” and predicted that “although the leftist camp failed to secure an absolute majority, the French finances will worsen due to the election results.” France already exceeds the European Union’s standard of 3% for fiscal deficit, standing at 5.5% of its Gross Domestic Product (GDP). In May of this year, Standard & Poor’s lowered France’s credit rating to AA-.’,
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, ‘TD Securities forecasted that French bond yields would rise, and the yield spread between German and French bonds, considered safe assets, would widen by over 80 basis points (1 basis point = 0.01 percentage points) again. This indicates investors’ increasing concerns about France’s fiscal and economic status, suggesting a rise in fiscal burdens such as debt interest. Some optimists also argue that over time, the French economy will stabilize. Emmanuel Cau, Head of European Equity Strategy at Barclays, stated, “Since President Macron achieved better-than-expected results in public opinion polls, he may be able to form a broad coalition, which could be positive for the market.”‘,
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