July 8, 2024 - 4:30pm

It turns out France’s “Republican front” is still alive. As much as the Left and centre detest one another, they still share a hatred of the Le Pen family project. In a stunning result, Marine Le Pen’s Rassemblement National came in third place in Sunday’s French elections.

However, France will be stuck with a hung parliament. A new government led by Macronists may take office, but even if it does it will have weaker legislative support than before the election. Alternatively, a tense cohabitation between a Left-wing cabinet and a president who resists its initiatives may emerge, rendering it largely ineffective.

But regardless of what government takes shape in the Elysée, what seems unavoidable is that further economic reform of the sort Emmanuel Macron had been undertaking will come to a halt. Amid such policy inertia, France’s myriad problems, not least its unsustainable fiscal path, thus look set to fester. With a fiscal deficit that now exceeds 5%, a generous but largely unfunded pension system and one of the highest debt-to-GDP ratios in the G7 — itself a group that tops the global debt-league tables — France is already raising concerns among creditors worried about a further loosening of its purse strings.

So instead of the much-feared Liz Truss moment, in which a party with expansive unfunded spending plans takes office and triggers panic in markets, France will now get what might be called its Jeremy Hunt moment. Everyone remembers how the former chancellor’s appointment and shredding of his predecessor’s budget in the autumn of 2022 immediately calmed markets and helped bring Britain’s soaring interest rates back to earth. Indeed, so traumatic was the experience of sharply rising mortgage costs which attended the aborted Truss-Kwarteng experiment that the issue featured in many doorstep conversations in this year’s general election campaign.

But less remembered is that while British interest rates quickly returned to their previous levels once Hunt took charge of the Treasury, they thereafter resumed a steady upward climb that would, over the following year, eventually return them to more or less the same level at which they’d peaked the previous autumn.

The problem was that the long-term problems facing Britain, from stagnant productivity to degraded public services and failing infrastructure, went largely ignored. France may now face a similar prospect. It will almost certainly lack a coherent political project for at least another year, the earliest at which Macron could call fresh elections. This may mean that public discontent with politics only deepens, which could yet strengthen either or both the far-Right and far-Left.

In other words, this play may not be over. Faced with such uncertainty, investors may hold off on their purchases of French bonds or shares, which would result in higher interest rates and further raising the costs of governing and the credit charges to businesses and households.

Whether he chooses to heed the call, France has called time on President Macron’s economic project. It has also declared loudly that it won’t tolerate a government of the far-Right. But it hasn’t yet made up its mind what should now follow. If there’s one thing markets hate, it’s uncertainty. Unfortunately, it also looks to be the only certain thing about French politics for the foreseeable future.


John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).

jarapley