The right-wing nationalist party National Rally (RN), led by Marine Le Pen and Jordan Bardella, was the winner of the first round of early legislative elections in France and projections indicate that for the first time it will be the party with the most seats in the National Assembly, after the second round, which will be held next Sunday (7).
However, this rise has been worrying the markets. In June, when the RN was the most voted party in the French elections for the European Parliament, which led President Emmanuel Macron to call early legislative elections, the Paris stock exchange fell, the euro depreciated against the dollar and negative assessments of French debt securities increased.
RN is not solely responsible for this fear, since the left-wing coalition New Popular Front, with its program of increasing public spending, came second in the first round of the legislative elections, on Sunday (30).
However, with populist and interventionist proposals, the RN’s economic platform, which has more chances of reaching the Executive (in the position of prime minister or president, if the political blockade is confirmed and Macron resigns), also causes concern.
“The prospect of the right-wing nationalist National Rally (RN) coming to government, a victory for the left-wing New Popular Front (NFP) alliance or the more likely scenario of a deadlocked parliament packed with fiscal populists has rattled investors, business leaders and France’s EU partners,” analysts Ben Hall and Ian Johnston wrote in the Financial Times.
Among the RN’s proposals are to encourage salary adjustments by exempting the amounts of these increases from employer contributions, up to the limits of 10% and three minimum wages; replacing the property tax created by Macron with a tax on total assets (which also includes deposits in current accounts, savings and investments, in addition to assets); and basing energy prices in France solely on that produced within the country, which, the party argues, would reduce the electricity bills of French households by 30% to 40%.
In addition, the RN wants to reverse the 2023 pension reform, enacted by Macron last year after weeks of massive protests and which raised the minimum retirement age in France from 62 to 64. The nationalist right plans to revert the cut-off age to 62 or even raise it to 60.
In 2022, when Le Pen lost the presidential election again to Macron (she had been defeated in 2017), the French think tank Institut Montaigne estimated that the economic policies she advocated would increase the country’s deficit by 101 billion euros per year.
Eulalia Rubio, senior researcher at the Jacques Delors Institute, said in an interview with the Politico website that, in addition to RN’s populist agendas, the party’s lack of administrative experience also scares the markets, which fear “incompetence or the lack of will to approve unpopular reforms” in a possible nationalist right-wing government.
“What generates uncertainty in the markets are the possible and abrupt fiscal and monetary changes. These are proposals that create a certain uncertainty for both investors and companies, who will always defend and prefer a stable, predictable economic environment,” said João Alfredo Nyegray, professor of international business and coordinator of the International Business Observatory at the Pontifical Catholic University of Paraná (PUCPR), in an interview with People’s Gazette.
“Le Pen’s party has been advocating the renegotiation of European treaties because, according to them, it is necessary for France to regain control over economic and monetary policies. Recently, they have even softened their stance on leaving the European Union, but there is still a very significant emphasis in these speeches on regaining national sovereignty, economic issues, although they are not 100% clear about what they mean by that,” he said.
Nyegray highlights that RN’s intention to change the pension reform is perhaps the biggest concern.
“When Le Pen talks about reversing the reform, which was already an intense struggle to pass, she accompanies this with talk of increasing public spending, financed, according to her, in part by reducing waste and fraud in social benefits. But she has not proven fraud on a scale that would allow the country to make up for a pension deficit,” he said.
Nyegray believes, however, that in a possible RN Executive, the party will be able to adapt and leave interventionist and populist agendas behind.
“If Le Pen becomes president, when she sits in the top chair at the Elysee Palace, she will likely have a reality check on what can and cannot be done, both in terms of economic viability and the economic organizations of the eurozone itself,” he predicted.
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