Battle for Paris
The French economy speaks for roughly 15% of the European GDP. In addition, France remains an important political decision maker in the European Union.”The European Union (plus Norway, Switzerland and Iceland) accounted for 25.4% of world output in 2014 according to data from the International Monetary Fund – greater than America’s share (22.5%) and well in excess of China’s 13.4%,” As relayed above, what happens in France has a significant effect on the European community, which in turn accounts for greater output than the USA and China.
The state of the French economy leaves much to be desired. This has resulted in a cloud of disillusionment nationwide, with no sight of anything remotely resembling a silver lining. The country cannot afford its social benefits, and has locked a quarter or more of its young people out of effective work. High taxes are another barrier blocking the French from the high standards of living they so desire (and the ones they see some of their European neighbors enjoying). As if that’s not enough, throw in a general feeling of unsettlement, due to a higher than average number of Islamic-led terror attacks, and you’ve got a recipe for a fed-up country, begging for a revolution.
Enter the two remaining candidates after the first round of the French elections, Marine Le Pen, leader of the ‘Nation Front’, and Emmanuel Macron of ‘En Merche!’ to save the day (and the country). Le Pen and Macron have contrary beliefs as to what led France to its dire state, as well as the resolutions required to bring it back to its once more optimistic status.
Le Pen’s far right viewpoints are based on the claim that ‘outside forces’ are responsible for the sad state of French affairs. She believes in the necessity to leave the EU and revive the French franc, and tighten immigration laws (to put it lightly). She is anti-globalization, anti-Islam, and anti-any country that isn’t France (with her plans to impede foreign trade). Just like the ‘Battle for Paris’ in 885, where the French triumphed over the invading ‘savages’, she believes that this battle needs to be won again, in 2017, for France to prosper once again.
In contrast, Macron believes the exact opposite. He believes a more liberal approach would result in making France stand strong once again. He vehemently believes in the benefits of opening France’s borders, both for trade and immigration. Whilst his exact policies have yet to be stated, he claims to be a “pro-globalization revolutionary.”
The implications of this revolutionary presidential election on both the EU/euro and the global market would be extraordinary.
The fact that over the past 24 hours, following Macron’s first round victory and emergence as the clear favorite, the euro has strengthened quite significantly, speaks volumes about the implications it will have should he win the election. The French CAC increased by over 4% in the past 24 hours, and other European stock markets have also rebounded substantially, with the FTSE increasing by over 2%, and the DAX by over 3%.
In contrast, should Le Pen pull through against the odds, the euro will plummet. France would take part in another ‘Brexit’ (or more accurately ‘Frexit’), thus weakening the European Union economy. This would most likely result in a contagion effect, with massive amounts of uncertainty surrounding the future of the euro and the European Union. In addition, certain countries such as Greece, Italy and Spain could default on their bank loans, which would put the entire world banking system in crisis.
The implications on the global markets should Macron win, would be encouraging, as there would be a lot less uncertainty for the European community. As demonstrated on many occasions, global markets do not perform well with uncertainty. Should Macron be successful in stimulating the economy through lower taxes, increasing the pension age and a general reduction in government expenditure, growth in France should improve. This would positively affect overall European growth, trade and employment. Unemployment should drop, and inflation should increase (which is actually positive in this low inflationary environment). But it’s not all sunshine and roses – the effects of a stronger euro (long term) could result in some less than desirable consequences. Exports would become more expensive for countries that purchase from EU countries. This may have a negative effect on exports, as the EU countries would become less competitive (Germany, for example, relies on the weaker members of the EU to keep the euro weak, which in turn stimulates their economy due to exports).
Although the ‘invading barbarians’ were defeated by the French in the Battle for Paris in 1885, it seems unlikely that Le Pen will have similar luck. After all, for the French people, the possibility of further economic downfall seems more devastating than the invasion of ‘barbarians’.