What Le Pen means for EMU

A possible victory for Le Pen's party in the snap elections for the National Assembly is putting pressure on French government bonds.

Dr. Jörg Krämer, Bernd Weidensteiner

Commerzbank Economic Resarch

June 14 2024

We analyze the increasing influence of right-wing parties on the statics of the monetary union and whether a government takeover by the Rassemblement National could lead to a sovereign debt crisis.

Le Pen might win the snap elections ...

The European elections have triggered a political earthquake in France. The right-wing nationalist Rassemblement National (RN), Marine Le Pen's party, won 31.4% of the vote, more than twice as many as President Macron's alliance (14.9%). He responded to this on Sunday with the first early dissolution of parliament since 1997. A new National Assembly will now be elected in two rounds on June 30 and July 7.

In view of the RN's strong performance in the European elections, it is quite possible that Marine Le Pen's party will also become significantly stronger in the national parliament and end up forming the government. This would be the first so-called "cohabitation" since 2002 in which the president and prime minister belong to different parties. The president would dominate foreign policy and would remain commander-in-chief of the armed forces. However, domestic, economic, fiscal and defense policy would be the responsibility of the government.

Jordan Bardella, the 28-year-old leader of the party and successful lead candidate in the European elections, would probably head such a RN government. The RN has already made it clear what its priorities would be: projects such as the Green Deal (already under pressure) or a European migration policy have been clearly rejected. It would oppose any expansion or deepening of the EU and, in particular, keep security policy firmly in national hands. Even if the RN no longer calls for a "Frexit" - i.e. France's exit from the monetary union and the EU - it still wants a Europe á la carte. France would only participate in EU projects that are in the national interest according to the RN, and they also want to set the rules.

... and form a government

Due to French electoral law, it is difficult to estimate how likely such an election victory for the RN is. Unlike the European elections, which are based on proportional representation, elections to the French National Assembly are based on majority voting. If no candidate achieves an absolute majority in a constituency in the first round – which was usually the case in previous elections – there is a second round of voting in which all candidates who won more than 12.5% of the vote in the first round are allowed to run. In previous elections, an RN candidate's victory in the second round was often prevented by the fact that most of the "traditional" parties agreed that only the strongest of their candidates would run in the second round.

In the 2022 election, however, this consensus had already clearly cracked, so that the RN was represented in parliament with 89 out of a total of 577 parliamentary seats, largely in line with its share of the vote in the first round (18.7%). If it were to achieve a similar result again, it would probably be very difficult to form a government without its participation, especially as the RN could even benefit from the majority voting system without the cooperation of the other parties and could even come close to an absolute majority with a vote share of over 30%, as in the European elections. Although President Macron has appealed to the other parties to return to the old consensus, he has had no visible success so far. However, a majority for his own party is unlikely in view of its poor performance in the European elections and the latest polls.

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