State Street Comments on French General Election Results

June, 2017

In reaction to the French legislative election results, Timothy Graf, head of macro strategy EMEA at State Street Global Markets, and Elliot Hentov, head of policy and research – official institutions EMEA at State Street Global Advisors, offer their views.
 
Graf comments, “The confirmation of a Republique En Marche (REM) majority in the National Assembly caps an astonishing six weeks in French and Eurozone politics. President Emmanuel Macron now has the majority, mandate and legislative backing to push for thorough reforms, not least of the French labour market. We are also interested to see how such an emphatic rise and win for a centrist, pro-European Union (EU) movement contributes to greater unification within what has been, at times, quite a fractured economic bloc.”
 
Hentov comments, “Macron will enjoy one of the largest majorities in French history. A large portion of these new parliamentarians are new to national politics and this reinforces the sense that a wholesale political revolution has taken place. Most importantly, it affirms that Macron will have incredible leeway in pushing his domestic agenda. Markets should therefore expect that labour reforms should pass, as should changes to the tax code and pension system. The impact could be structural and two-fold, both in boosting French investment and productivity gains as well as in setting the stage for more audacious reforms of the Eurozone. Nonetheless, Macron will still face public hostility to his reforms, possibly in the streets but not in parliament, but after yesterday, that will likely be expressed in burning tires rather than parliamentary machinations.”