Following a significant loss in the EU elections, French President Emmanuel Macron has announced his intention to dissolve parliament and call for a snap legislative election.
What Happened: Macron’s decision comes in response to exit polls indicating a win for Marine Le Pen’s far-right National Rally (Rassemblement National, or RN) with an estimated 31.5% of the vote, compared to Macron’s Renaissance party’s 14.5%, CNBC reported.
“I will … not be able, at the end of this day, to act as if nothing had happened,” Macron stated in a televised address. The first round of the parliamentary election is set for June 30, followed by a second round on July 7.
European stocks dropped as traders responded to EU Parliament election results and French President Emmanuel Macron’s call for snap elections.
Le Pen welcomed the news, expressing readiness for the upcoming election. This move by Macron is seen as risky, as a win for Le Pen’s RN could leave him with no control over France’s domestic issues. Macron’s presidency is set to end in 2027, and he is ineligible for a third term.
According to Holger Schmieding, chief economist at Berenberg Bank, Macron’s unexpected call for a new parliamentary election could be an attempt to revive his party’s fortunes. However, Schmieding also noted that new elections add uncertainty that could cause concern for markets.
Why It Matters: European markets experienced declines on Monday following initial results from the EU Parliament elections and a surprise call for parliamentary elections by Macron. The pan-European Stoxx 600 index fell 0.7% by 11:27 a.m. London time, with construction stocks leading the losses, down 1.5%. The euro also slipped 0.6% against the U.S. dollar and 0.35% against the British pound.
The French CAC 40 index dropped more than 2% through Monday morning. French banks, including Societe Generale and BNP Paribas, saw significant declines, falling 7.4% and 5%, respectively. Investors are concerned about potential interventionist economic policies and stronger regulation from France’s far-right National Rally party.
Strategists at Barclays mentioned that the snap French election “spooked the market” on Monday. However, they believe the most likely outcome is another hung parliament or coalition for Macron, rather than an outright majority for National Rally.
The rise of far-right parties in the EU Parliament elections has broader implications beyond Europe. Edward Snowden, former National Security Agency contractor, suggested that the election results could signal trouble for U.S. President Joe Biden. Snowden noted that pro-war politicians were “harshly punished” in the EU elections, hinting that this might not bode well for Biden’s administration. This shift towards populism and far-right ideologies could affect international relations and economic policies, potentially leading to increased market volatility globally.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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