UBS: French election - Second-round preview

Emmanuel Macron looks set to defeat Marine Le Pen in Sunday's second round of the French presidential election, according to opinion polls. Investor anxiety has decreased after polls proved rather accurate in forecasting the round-one outcome.

Opinion polls suggest Emmanuel Macron wins round two by a wide margin

Following his win in round one, when he obtained 24% of the votes, Emmanuel Macron looks set to defeat Marine Le Pen in Sunday's second round of the French presidential election, according to opinion polls. These polls suggest support of around 60% for Macron and 40% for Le Pen (Figure 1). Key to watch will be tonight's live TV debate between the two contenders at 9pm CET. Investor anxiety has decreased after polls proved rather accurate in forecasting the round-one outcome. Participation is projected to be 75%, lower than in round one (78%) or in the 2012 round two (80.5%). In prior presidential elections since 1988, the round-two winner obtained between 51% and 54%, with 2002 being an exception, when Jacques Chirac received 82.2% as he faced Jean-Marie Le Pen (Figure 2). As in round one, the last polling stations will close at 8pm local time on Sunday (7pm London time) and exit polls will be available at that time. Currently, opinion polls suggest that a Le Pen victory would be a surprise; our macro strategists have explored the market implications of such a scenario in this note: If Le Pen wins – Cross asset implications.

After the presidential elections – what's next?

The new president will be inaugurated on 14 May at the latest, the last day of President Hollande's administration, with the likely date being 11 May (Figure 3). Afterwards, the focus is set to shift swiftly to the parliamentary elections, which will be held in two rounds across 577 constituencies on 11 and 18 June. The outcome of these elections will influence the choice of prime minister (who is appointed by the president, but can be brought down by parliament in a vote of no confidence), and thus impact the extent to which the next president can push through his/her agenda (see Figure 4 for details). In case of a Macron win, interest should focus on how much of his reform agenda the new president will be able to implement. As we have argued before, the French GDP growth rate used to be above Germany's pre 2008, helped by more growth-friendly demographics. Structural reforms in the area of labour market flexibility and taxation could go some way to help lift French growth potential (again). For details, please see: France: Looking (way) beyond the elections, 21 March 2017. Economic issues related to the  labour  market  and  their  own  income  situation  dominate  voters'  minds.  Globalisation and concerns about Europe lag well behind.

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