The French Election: Why the E.U. Is Breathing a Sigh of Relief – for Now

French election

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Wharton's Joao Gomes and Olivier Chatain from HEC Paris discuss the results of the first voting round of the French presidential election.

With centrist Emmanuel Macron and right-wing populist Marine Le Pen the top vote-getters in the first round of the French Presidential election on April 23, the stage is set for a showdown in the second and final voting round set for May 7.

A clear — and surprising — lesson from the first round: Voters are disenchanted with France’s established parties and chose instead two candidates outside the mainstream. Defeated in the race were Francios Fillon, a center-right conservative, Jean-Luc Melenchon, a far-left, anti-economic austerity advocate, Benoit Hamon, also a far-left candidate, among others.

Macron is viewed as a pro-business centrist with socially liberal views. Just 39, he had never run for elected office until a year ago. Marine Le Pen is typically described as a far-right politician who advocates a populist and nationalist economic agenda, takes a hard line against immigration and often talks of France exiting the European Union.

Since most polls and pundits suggest that Macron will defeat Le Pen to become president – many by a margin of at least 20% — those favoring France’s continued membership in the E.U. are breathing a big sigh of relief. U.S. and European markets rallied on Monday as fears of a major disruption receded. Reports noted that both center-right and Socialist party leaders have endorsed Macron for president, because they consider Le Pen too divisive.

In Sunday’s election, Macron won 23.8% of the vote versus 21.5% for Le Pen with most of the votes counted. According to French election rules, the top two vote-getters advance to the final contest. Many observers thought Le Pen would be the top voter-getter, particularly in the wake of last week’s terrorist attack in Paris, given her position to severely limit the number of immigrants entering the country.

Wharton finance professor Joao Gomes and Olivier Chatain, a professor of strategy and business policy at the HEC Paris business school and also a senior fellow at Wharton’s Mack Institute for Innovation Management, discussed the key implications of the election on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

“We have a very unprecedented situation now,” Chatain noted on the show. From a U.S. perspective, “It’s as if you had a presidential election and there was not a Democrat or a Republican for whom you could vote. So this is a major realignment potentially.”

He called it “a little bit of a surprise” that Le Pen did not finish first, and that may be the result of Macron receiving more support than expected from the “centrists and supporters of European integration.”

Notes Gomes: “There are going to be some problems. Winning the presidential election is step one, but what can Macron actually do? He does not have a party to support him. … He’s young, does not have a lot of experience, and most importantly does not have a lot of foreign policy experience. A lot of the things he wants to accomplish — with flexibility of labor markets, reduction in corporate income tax codes, a general pro-growth environment … clearly markets have responded to, and would like to believe, but the ability to execute is the question mark.”

In the end, Gomes adds, France has many constraints that will limit the room to maneuver for any president, including being in the European Union and having relatively large debts and low growth. “A lot of the agenda is going to be dictated by [France’s] relationship with Germany and the new German Chancellor in October. So, I don’t think [the election] changes that much going forward.”

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