Emmanuel Macron’s win in the French Presidential election is good news for France and the Eurozone. Mr Macron appears to have secured around 66% of the vote to 34% for the National Front’s Marine Le Pen.
In electing a President whose party En Marche! is only a year old, the French electorate has rejected the political establishment. That said, voter turn-out was low suggesting a level of dissatisfaction with both candidates.
The good news is France has chosen a liberal reformist President who is second only to Angela Merkel in his support of the Euro-project. France has been, along with Italy, one of the Eurozone’s poor economic performers. Low growth, poor productivity and high unemployment are key features of France’s recent economic performance. A solid dose of structural reform is urgently required. France needs Mr Macron to deliver.
Key planks of Mr Macron’s policy platform include:
- Greater Eurozone integration and co-operation on fiscal, social and environmental policies
- A ‘Nordic-style’ fiscal policy mixing modest spending cuts with fiscal stimulus including tax cuts, keeping France’s budget deficit below the European Union limit of 3% of GDP
- A smaller state: he intends cutting 50,000 public sector jobs
- Modest deregulation of the labour market, including giving companies the freedom to negotiate their own deals on pay and working hours, and
- Pro-free-trade: in fact he was the only free-trade advocate in the presidential campaign.
Attention now turns to how much of his programme the new President is able to implement. Critical to this is whether En Marche! can win a parliamentary majority in next month’s National Assembly elections or whether some form of coalition will be required, most likely with the centre-right Republicans. Not only is this an opportunity for France to undertake much needed reform, it’s a massive opportunity for Europe to also push on with strengthening the framework of the currency union.
We began this year with concern about the upcoming elections in Europe and what that might mean for the stability of the Eurozone. So far we have seen wins for pro-Europe governments in the Netherlands and now France. German Bundestag elections come later this year in October, but both likely candidates for Chancellor, Angela Merkel and Martin Schulz, are staunchly pro-Europe. Italy remains a risk with an election next year. But in the meantime, it would be disappointing if Europe’s leadership were to squander the newly re-committed support for a unified Europe.
We have maintained our over-weight to developed market equities over the course of the year on the back of the improved growth and earnings outlook. With the French election now out of the way another source of potential risk is behind us and we expect growth assets to respond positively to this outcome.
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