France 2eme Tour.
Expected: Le Pen/RN does not get (nor should she want) a majority under a Macron Presidency. . Such a “cohabitation “ would taint her. She would cement her position to be France’s next President better by being “kept out of power “ by a weak 5-way Macron led coalition. This would meet several of our forecasts.
- The parties in such a coalition have nothing in common and ungovernable 🇫🇷 is the result.
- France will be narcissistic so nothing will be undertaken at EU level where the 7 Pillars of Reform are urgent (See Dounut).
- German paralysis will be reinforced. Scholz will be seen as a good stable option versus French instability.
- Again the traditional centre parties (anywhere) have no answer to the rise of the populist vote except to disenfranchise the voters by building rickety coalitions to keep populists out of power.. Not good for Democracy.
- The establishment may be overestimating their hand in asking their supporters to vote for left wingers and ex communists to keep right wingers out of power. Voters may just abstain. If they do then RN could be suffer from too much success and get a majority!
The main expression of this in strategy is to be short OATs & long Bunds. Spreads are still 70bp or less and could double as France runs could have the EU Excessive Deficit Procedure.