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Today is April 19, 2022. And we are 5 days away from the second round of the French Presidential elections.

Three key developments to watch;

  • Part of the campaign where programs are compared
  • Debate tomorrow Wednesday April 20;
  • What will France’s position be on Monday regarding the European Union

Macron program was unveiled few weeks ago. His key proposals are around a “Revenue Solidarité Active” (RSA) with commitment to several hours of paid civil work, retirement age pushed to 65 (from the current 62), an increase of 50% of the allocation to single mothers, construction of 6 nuclear reactors, increase of the military budget.

Le Pen’s program on the other hand articulates itself around several measures meant to attract young voters and the part of the population that rejects immigration. She proposes, once she is elected, to organize a referendum about immigration. She wants to impose a tight control of immigration through a specific law approved by parliament. The law would reduce immigration but also the rights granted to foreigners living in France. The law would include measures meant to expel foreigners who have not worked for 1 year and those who have been subject to legal actions. Social benefits would also be reserved to French citizens in priority and forbidden to foreigners who have not worked for more than 5 years in France. The new law would also provide a priority to French citizens on the labor market. It would make discriminatory practices legal in recruitment processes. It’s actually something that recruiters already practice actively, so nothing would really change compared to the present situation. But the law would make these practices totally legal. So, this is part of the chocolate coating that I was evoking in yesterday’s post.

But is she going to be able to distribute all these chocolates that easily ?

France is already on a collision course with the European Union and its more fiscally responsible partners within Europe. Regardless of who wins, France has already broken all the rules on the fiscal front. We have described yesterday how France belongs to the group of countries that are way above the 60% of total national debt as a percent of the Gross Domestic Product. With a 116% ratio, French debt remains way above its German partner of 60%. Moreover, the fiscal deficit has yet to catch up and go back to the 3% threshold also imposed by the stability pact among Euroland partners.

France’s partners will probably not give a hard time to Paris regarding these fiscal and debt deviations, yet, key interest rates and bond yields have started to react on the way up. They alone will dictate another course of action. Indeed, even though rates and yields are starting from a historically low level, the sensitivity of that debt will not compare to what we had 20 years ago when rates and bond yields were way higher.

The stock of the debt is indeed a lot more massive and the slightest rise could have a much more devastating effect than in the past. This alone could lead to a collision course among its major partners.

Let me know if you have questions and I look forward to hearing your thoughts. Feel free to comment.


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