French markets tumble as Macron calls snap legislative elections: FT
3 Min Read
The Cac 40 stock index plummeted by 2% to its lowest point since February, with notable declines in the banking and utility sectors.
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Brokers watch their screens at the stock market in Frankfurt, Germany, Monday, March 13, 2023. In the background the curve of the German stock index DAX (AP)
French President Emmanuel Macron's decision to call for snap legislative elections has sent shockwaves through both French and European markets, the Financial Times report.
The move comes in the aftermath of Macron's centrist alliance suffering a significant defeat at the hands of Marine Le Pen's right-wing movement in the European legislative vote.
The repercussions were immediate, with French stocks and bonds taking a hit, leading to a widespread downturn in European indices.
The Cac 40 stock index plummeted by 2% to its lowest point since February, with notable declines in the banking and utility sectors.
Le Pen's Rassemblement National (RN) secured a substantial 31.4% of the vote, dealing a blow to Macron, who narrowly avoided a humiliating third place behind the center-left.
Read more: Macron calls snap elections after right-wing victory in EU polls
In response to the political instability and the prospect of a right-wing government, investors offloaded French government debt, causing a rise in yields on the benchmark 10-year bond.
Across Europe, markets reacted with apprehension. The Stoxx Europe 600 lost 0.8%, Germany's Dax fell 1%, and London's FTSE 100 dropped 0.4%. The euro also experienced a decline against the US dollar.
The dissolution of the legislative body and the call for early elections represent an extraordinary gamble by Macron, who has already lost his legislative majority.
With the possibility of his alliance being crushed, Macron may be forced into a "cohabitation" scenario, limiting his power over domestic affairs.
Macron justified his decision by citing the need for clarity and resolution in the face of volatile legislative debates.
Read more: Euro plummets, as Macron's snap election call shakes markets
Centrist politician François Bayrou supported Macron's move, framing it as an opportunity to break the political impasse and confront the rise of the far right.
Meanwhile, Le Pen celebrated her party's victory, declaring that the people had spoken and expressing readiness to exercise power if supported by the French electorate.
With 88 seats in the National Assembly, RN stands as the largest opposition party, posing a significant challenge to Macron's agenda.
'We are ready to exercise power'
On Sunday, Marine Le Pen has declared her party's readiness to take power in France upon hearing its victory in the European Parliament elections.
"We are ready to exercise power if the French people place their trust in us in these upcoming parliamentary elections," Le Pen announced in Paris on Sunday evening.
"We are ready to rebuild the country, ready to defend the interests of the French, ready to put an end to this mass migration, ready to make the purchasing power of the French a priority, ready to start re-industrializing the country," she stressed.
