Economic heresy is real winner in French election

A poster campaign with factice portable cellphone numbers for French presidential candidates, Top row from L, Benoit Hamon, Socialist Party candidate, Emmanuel Macron, candidate for "En Marche !" or (Onwards !), Nathalie Arthaud, candidate for France's extreme-left Lutte Ouvriere, and Marine Le Pen, the National Front (FN) leader and candidate; Bottom row R, Francois Fillon, the Republicans centre-right candidate, are seen on a wall in Paris, France, April 19, 2017. REUTERS/Benoit Tessier

LONDON (Reuters Breakingviews) - French politics keeps throwing up new terrors for investors. They were already perturbed by the strong showing for Marine Le Pen in the upcoming presidential election. A late surge in support for Jean-Luc Melenchon has raised the prospect that the contest may force voters to choose between candidates from the far right and the hard left. Though that scenario remains unlikely, proponents of economic heresy could still end up with more than two-fifths of the vote in the first round on Sunday.

Le Pen and Melenchon share an antipathy for the European Union and globalisation. The National Front candidate wants to quit the euro and hold a vote on EU membership. Her far-left rival wants to leave the bloc if some of its rules can’t be changed. Both have embraced protectionism, with Le Pen calling for a tax on imports and Melenchon promising a veto of international free-trade agreements.

The two also share a blasé attitude to borrowing. Melenchon’s stimulus plan carries a price tag of 100 billion euros while Le Pen sees France’s budget deficit jumping to 4.5 percent of GDP in 2018 if she is elected, up from an expected 2.8 percent of GDP in 2017.

Such policies are heretical to investors but increasingly appeal to French voters. Opinion polls suggest that Le Pen and Melenchon’s combined share of the vote could top 40 percent in the first round on Sunday. That’s a big jump from the 29 percent they scored between them in 2012.

Granted, Emmanuel Macron has a narrow lead in the polls going into the first-round vote, and would be expected to beat either Le Pen or Melenchon in the subsequent run-off. But while a win for the independent centrist would be a relief for investors, it could store up problems for the future. The pro-European Macron wants to rein in the budget deficit, cut public sector spending and jobs, and pursue economic and labour market reforms. Those policies are broadly the same ones that have been espoused by French leaders for years.

Le Pen and Melenchon currently lack the machinery to win a majority of seats in the French parliament. But the appeal of their radically different economic visions will not be lost on others. Mainstream politicians may be forced to conclude that the way to beat them is to borrow some of their ideas.


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