French president Emmanuel Macron’s shock decision to call a snap general election has backfired disastrously. His centrist Renaissance party will be crushed between right-wing populist Marine Le Pen’s National Rally and a new combined hard-left front next month.
Le Pen came second in the 2017 presidential election but faces a challenge from the left, whose leading parties have combined forces together to form the New Popular Front.
Neither right nor left have the answers to the country’s financial problems. Their only solutions are to spend money that the country doesn’t have and can’t afford to borrow.
The UK has problems but our economy is in rude health compared to France. Our GDP grew at 0.6 percent in the first three months of the year, France crept up just 0.2 percent.
In the UK, the state swallows 44.3 percent of total economic output. In France the figure is a staggering 58.3 percent, the highest in the developed world.
France has posted a budget deficit for each of the last 50 years, without exception.
Only the US and Japan owe more money than France relative to the size of their economies, but they have the cushioin of their own currencies.
France has signed up to the euro and could bring the whole structure crashing down.
Yesterday, French finance minister Bruno Le Maire warned the country is facing its “Liz Truss moment”.
That’s short-hand for a country whose currency and economy goes into meltdown because global bond markets think their rulers have the financial acumen of a wet lettuce.
Le Maire said France is heading for a financial crisis regardless of whether left or right win, because neither side is going to tackle the country’s spirallinng debts.
Instead, they’ll spend, spend, spend and expect bond markets to carry on lending them the money. But bond markets have had enough and French borrowing costs are surging as investors demand more interest.
Le Pen plans to cut the state pension age to 60, which would be ruinous.
The new left front is a ragtag of socialists, greens and full-on communists, so they’re obviously not going to cut spending.
Which means France is doomed either way.
For all his faults, Macron’s did try to curb spending and revive the economy. And the French hate him for it.
Last week, French shares crashed again. The euro plunged. France now has to pay more interest to borrow money than Portugal.
Normally stock markets don’t really care what happens in French politics. They prefer to ignore the whole mess.
That’s not the case today.
Investors are dumping shares and racing to put their money in safe haven like US government bonds, gold and the dollar.
Last week, French shares lost around $210 billion. That’s roughly the size of the entire Greek economy.
Le Pen is on a collision course with the EU. And so are the left, because its plans will smash EU tax and spending policy.
Thierry Wizman at financial consultants Macquarie Group said France is racing to the political extremes as neither right nor left support pro-market principles, fiscal responsibility and “possibly not even the single currency”.
It’s going to be bloody. French revolutions usually are.
In 2010, the tiny Greek economy almost sank the EU. France has a far bigger chance of doing so.
This poses severe problems for Labour leader Keir Starmer, who has pledged to build closer links to the EU if he wins the UK general election on July 4.
With right-wing European populists on the march he may find few political friends over there. Assuming the EU survives at all.
