The upcoming election in France is causing concern among investors as the far-right National Coalition has the possibility of winning. If this were to happen, it could lead to the overturning of economic reforms implemented by President Emmanuel Macron. This uncertainty has led to a six percent drop in the CAC 40 index of Paris stock exchange since Monday, with bank shares being hit particularly hard. Crédit Agricole and BNP Paribas have fallen by around nine percent.
The growing power of left-wing parties and far-right in the parliament is causing concern among investors, with Marine Le Pen’s promises to increase public spending further complicating matters. In response to this political crisis, four left-wing parties have formed an electoral alliance, adding to Macron’s challenges with his economic reforms in the upcoming elections on June 30 and July 7.
Economists fear that if economic reforms end, France may face a potential downgrade of its credit rating and even talks of leaving the eurozone. This market uncertainty has spread to other parts of the euro area, with German, Italian, and Spanish stock markets also experiencing losses. The euro has weakened against the US dollar and risk premiums for French government bonds have risen as a result of political instability.
