investment insights

    First-round French vote leaves far-right short of absolute majority

    First-round French vote leaves far-right short of absolute majority
    Samy Chaar - Chief Economist and CIO Switzerland

    Samy Chaar

    Chief Economist and CIO Switzerland
    Bill Papadakis - Senior Macro Strategist

    Bill Papadakis

    Senior Macro Strategist

    Key takeaways

    • The French populist Rassemblement National (RN) gained a third of the first-round vote in parliamentary elections, leaving it unlikely to achieve an absolute majority. A left-wing alliance placed second with 28% and centrist parties earned 21%
    • The second round vote on 7 July may see an unusual number of three-way races, unless the left-wing and centrists agree to a customary block of far-right candidates
    • The most likely result looks like a ‘hung’ parliament that risks political paralysis, either with a caretaker, or RN-led minority government. We have revised our probabilities for the three scenarios
    • Financial assets have begun to re-trace following the first-round results.

    In first-round elections yesterday, the French electorate gave the populist ‘Rassemblement National’ party a 33.2% share of the vote, in line with expectations. The ‘Nouveau Front Populaire’ (NFP), an alliance of left-wing parties, secured the second-largest share of votes with 28%, and the ‘Ensemble’ centrists, represented by Prime Minister Gabriel Attal and including President Emmanuel Macron’s ‘Renaissance’ party, placed third with 21%.

    It gives the RN party a relative majority, without an absolute majority, which would require at least 289 of the national chamber’s 577 seats.

    However, the first round results mask a huge amount of uncertainty around the final makeup of the French parliament. It creates an unusually high number of three-way races for parliamentary seats, making forecasting the result very tough: traditionally the first-round leader goes on to win a large share of constituencies in the second round, but this is less clear-cut.

    The final outcome depends on how the centre and left-wing parties choose to field their candidates in the second round of voting on 7 July. Historically, French political parties have coordinated to block the far-right from gaining power. The crucial factor is the centre and left wing’s second-round strategy, and the result of any negotiations among them. Jean-Luc Mélenchon, leader of the left-wing ‘France Insoumise’ (LFI) party, has said his party’s candidates who placed third will withdraw. The centre has also taken a similar approach, as stated by Mr Attal, although making an exception for run-offs against far-left LFI candidates. The deadline for such agreements is the end of 2 July.

    The most likely result looks like a ‘hung’ parliament that risks political paralysis

    The most likely result looks like a ‘hung’ parliament that risks political paralysis, either with a caretaker, or hard right-led minority government, at least until the next presidential election scheduled for April 2027 (see table).

    The country has experienced similar ‘cohabitations’ in the 1980s and late-1990s-early-2000s, but it would leave domestic legislation gridlocked and reduce the likelihood that the country’s fiscal deficit will be addressed.

    The key question in a possible RN win would be how they choose to govern. Would they take a confrontational approach and break with the European Union on topics including the budget? Or a more conciliatory approach, similar to the far-right Italian government of Giorgia Meloni, and so approach the political centre on many issues?

    Financial markets have priced in the potential for a paralysed French political environment since President Macron dissolved the assembly three weeks ago. The spread between French 10-year OATs or ‘Obligations assimilables du Trésor,’ and German sovereign Bunds widened in the wake of the decision to dissolve parliament while the French CAC40 index declined 6.5% over the month of June, and the euro recorded its biggest decline in a year against the dollar. Following the first-round results, these market moves have partially re-traced.

    For further analysis, including a table of scenarios, probabilities and asset class impacts, please click here.

    Also read our CIO Office Viewpoint following the European Parliament elections.

    Important information

    This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
    It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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