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French Finance Chief Warns That Victory for the Left Would Mean Exit from the EU
(Bloomberg) — French Finance Minister Bruno Le Maire warned that the victory of a new left-wing alliance in the next early vote would lead to the country’s exit from the European Union, as he put fears about the economy at the center of the campaign.
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The program of the Popular Front, made up of four left-wing parties, would cause “economic collapse”, he told Franceinfo radio. The coalition is expected to present its electoral promises this Friday and has not suggested leaving the bloc.
“Their program is complete madness,” Le Maire said. “This will guarantee relegation, mass unemployment and exit from the European Union.”
Le Maire joined President Emmanuel Macron in warning about the consequences of far-right or far-left parties coming to power. But these alarms may fail this time, given the precipitous drop in support for the president’s party and after some of the most extremist groups have moderated their platforms.
Investors wiped more than $100 billion from the value of French shares, with banks Société Générale SA, BNP Paribas SA and Crédit Agricole – all large holders of government bonds – losing more than 10% each.
The CAC 40 index fell nearly 6% for the week, heading for the biggest weekly drop since March 2022 and coming close to losing the year’s gain. The recession has put France at risk of losing its crown as Europe’s biggest stock market.
The Greens, Socialists, Communists and the far-left France Insubmissa party announced on Thursday they would contest the vote as a single group, with polls showing it could beat the second-largest bloc behind the National Rally.
According to a draft alliance manifesto seen by Bloomberg and which may still be amended, the parties would refuse the “austerity restrictions” of the EU fiscal pact governing debt and deficits. Domestic economic policies would include increasing paid annual leave from five to six weeks, reinstating a wealth tax abolished by Macron, and abolishing his pension reform to restore the right to retire at age 60.
For the financial industry, the draft manifesto said it would strengthen taxes on financial transactions and force banks to increase reserves to deal with climate risks.
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“The markets have already shown sensitivity to the political situation in France. Its high debt burden makes France vulnerable to changes in investor sentiment and there is a clear danger that spreads could widen further if elections trigger a major change in political direction.”
—Eleonora Mavroeidi and Jamie Rush. For full reaction, click here
Members of conservative Republicans are also prepared to forge an alliance with Marine Le Pen’s far-right National Rally ahead of early legislative elections in France.
“We are in the process of working and finalizing this agreement both on the platform of proposals and on nominations,” said National Rally spokesman Sebastien Chenu in an interview Friday on France 2. Around Republican leader Eric Ciotti , “There will be a large number of candidates, about 80 from the Republican family,” he said.
These measures signal a potential disaster for Macron’s party. As France has a two-round electoral system with a hurdle to advance to the second ballot, many of Macron’s centrist Renaissance candidates may not even make it to the last day of the elections.
Le Maire said in the interview that the National Rally program is based on “lies” and said that his promise to reduce VAT on heating oil, gas, electricity and food will cost the state 24 billion euros (25.7 billion dollars). He said the National Rally and Popular Front programs will not be able to finance France’s debt.
To complicate matters further, Republicans are embroiled in bitter infighting as most senior party members attempt to oust Ciotti over the National Rally pact. He refuses to resign and is appealing to the Paris court.
Macron dissolved the National Assembly on Sunday and announced legislative votes on June 30 and July 7. This happened after his political group was defeated by the National Rally in the elections for the European Parliament.
The National Rally is on track to win 270 of the 577 seats in the National Assembly, compared with 90 to 130 for Macron and his allies, according to a projection by pollster Elabe.
Adding to the disorder, the French union CGT called for strikes across the country on Saturday to warn against France’s slide into “fascism.”
The decision to call early elections has caused political chaos and spooked investors, as the vote raises uncertainty over how the next government will handle France’s public finances. Le Pen’s party is on track to win the most seats, which would give her the role of prime minister and give her an advantage in forming a new cabinet, including more influence on economic policy.
–With assistance from Michael Msika.
(Updates with markets from fifth paragraph. An earlier version of this story corrected the spelling of National Rally in the chart.)
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