For French President Macron, the second round of voting in the French National Assembly elections that just ended on Sunday (July 7th) clearly brought a mixed result.
Fortunately, with the joint efforts of its centrist camp and the left-wing alliance New People's Front, both sides have suppressed the rise of the far right political party National Alliance, which led the first round of voting; The concern is that although this election narrowly defended the far right, the centrist camp is no longer able to prevent the expansion of the left.
After the unexpected victory of the left-wing coalition thwarted Le Pen's efforts to push for extreme right-wing rule, France is about to usher in a "floating parliament" where no single party or caucus has won an absolute majority of seats, as well as the already difficult negotiations to form a government.
Parliamentary election results: guarded on the right, not on the left
According to local media citing data from the French Ministry of the Interior, in the second round of election voting on Sunday, the National League led by Le Pen and Baldella ultimately won a much lower number of seats than predicted a week ago. In the end, the distribution of seats in the French National Assembly presented a "tripod" situation:
The left-wing alliance, the New People's Front, won 182 seats, ranking first; The centrist camp led by President Macron "came together" and won 168 seats, ranking second; The far right camp, the National League, only won 143 seats, surprisingly ranking third.
This result represents a huge success of the hastily reached "Republican Front" strategy against the far right over the past week - according to this strategy, left-wing and centrist parties strategically withdrew more than 220 candidates with fewer votes in the runoff vote, thereby gathering votes and engaging in fierce "strangulation" of the far right in various constituencies.
Although compared to the previous parliament, the number of seats won by the National League has still expanded significantly - it only had 88 seats in the previous parliament, at least this time, the pace of French politics turning completely to the right has ultimately been delayed. Of course, after the election results were announced, the leader of the National League, Le Pen, still refused to show weakness, stating that her party's victory was only "postponed" and that the right-wing "trend is rising". She also mentioned that the number of members of the National League has doubled.
For Macron, he had previously stated that he would continue to rule until the end of his term in 2027. And now, a major thorny challenge for the French president after the election is how to piece together a new government from scattered parties.
In fact, apart from the common goal of preventing extreme right-wing parties from taking power, the two major camps of the hastily formed "Republican Front" have almost no other common position. Even in the eyes of many market insiders in advance, the sudden rise of the left-wing alliance "New People's Front" is a worse result for France's fiscal prospects and the pro business reforms implemented by Macron in the past few years compared to the far right taking power
The New People's Front promised to repeal many of Macron's economic reform measures during the election, including his decision to raise the legal retirement age to 64. The left-wing alliance hopes to lower the retirement age to 60 years old, reinstate a wealth tax, provide more housing benefits, increase public sector wages, and link it to inflation. This series of plans means a significant increase in government fiscal spending and is likely to lead to a reversal of the French government's series of reform measures over the past seven years.
According to previous estimates by the European think tank Institut Montaigne, the campaign promises of the left-wing New People's Front will require nearly 179 billion euros in additional fiscal spending annually; In contrast, the plan of the far right National Alliance will cost about 71 billion euros, while Macron's political party and its allies will incur additional fiscal expenditures of nearly 21 billion euros.
It can be said that the left-wing alliance is even a more thorny "hidden mine" than the far right in terms of its impact on France's finances, debt ratings, and financial markets alone. And this is obviously also the reason why the euro quickly opened low and under pressure after the opening of the Asian session within the day.
And next, there will be tense and intense negotiations between the centrist and left-wing alliances regarding the formation of a government. With Prime Minister Gabriel Attal announcing his resignation on Monday, this chaotic situation is less than three weeks away from Paris hosting the 2024 Summer Olympics.
Post election focus: Can a coalition government be formed between the center and left?
At present, in the first time after the election, the far left political party in the New People's Front and the largest party in the left-wing alliance, "Unyielding France," has begun to "demand power" from Macron
Jean Luc Melenchon, the founder of France, delivered an exciting speech after the election, demanding that Macron's Prime Minister Gabriel Attal resign. Mei Langxiong also called on Macron to authorize the New People's Front to form a government and implement its agenda, and to fully abide by its campaign promises. "The President must bow his head to acknowledge this failure and not attempt to avoid it in any way," said Merronxiong.
According to French law, there is no institutional requirement for the President to appoint the position of Prime Minister to a relatively majority party in parliament. However, as the Prime Minister may face a vote of no confidence in parliament, if the majority of members in parliament vote against the government, the Prime Minister will be dismissed. Therefore, in practice, the Prime Minister will mostly come from the dominant party or alliance in the National Assembly.
Of course, in terms of the current post election situation, Macron and the centrist camp are likely to have their own "caution" - they are unlikely to easily submit and hand over power to the "indomitable France" who oppose them in many policies.
In the centrist camp, the general secretary of the ruling party, the Renaissance Party, Stefana Seruney, stated on Monday that he is willing to cooperate with mainstream political parties, but ruled out the possibility of reaching any agreement with the far left party of Merronxiong. Former French Prime Minister Edward Philippe has also ruled out the possibility of reaching any agreement with far left political parties.
In fact, in the eyes of Macron and the centrist camp, the left-wing alliance's "New People's Front" itself may not be without the possibility of splitting and rallying for "my own use". The New People's Front was hastily formed after Macron announced early elections last month and is not considered a long-term ally in itself. In addition to the most extreme form of "indomitable France", the political parties of this left-wing alliance also include the relatively moderate Parti Socialiste, Parti Communiste Franais, and Les Verts.
Industry insiders have suggested that Macron may hope to separate the Socialist Party and the Green Party from the left-wing alliance, thereby isolating "indomitable France" and forming a new center left alliance with his own centrist camp.
Former Socialist Party President Francois Hollande, who was elected to the National Assembly on Sunday, stated that he expects Macron to meet with leaders of major political parties and attempt to explore a path in the unknown areas he describes. Hollande said, "The question is what kind of role the National Assembly is willing to play and what kind of role it is unwilling to play. Perhaps institutional innovation can be imagined."
If the agreement cannot be reached in the end, what will happen next?
Finally, what would happen if the centrist camp and left-wing parties were unable to reach an agreement on a gradual coalition government?
For the Fifth French Republic established in 1958, this may be an unknown territory. The French constitution stipulates that Macron cannot announce new parliamentary elections within 12 months. At present, Atar, who has stated that he will submit his resignation, although he can still temporarily act as prime minister, this is clearly not a long-term solution.
As the President, Macron does have the power to decide who to appoint to form a new government. But no matter who he chooses, he must accept a vote of confidence from the National Assembly, which will hold a 15 day session starting from July 18th - which means Macron needs to nominate a candidate that most members of parliament can accept.
Some industry insiders suggest that if there are serious differences between the various political parties in the end, Macron may choose to appoint a "technocratic government" and announce parliamentary elections again a year later. Of course, the requirements for appointment candidates will be more stringent - candidates for Prime Minister and Minister must be senior civil servants, economists, diplomats, or experts who are recognized solely for their professional skills and do not carry party labels.
A technocratic government can temporarily ensure the normal operation of the government within a year, such as approving the annual budget for 2025. But once it causes dissatisfaction from other factions and leads to impeachment during the governance process, it may also be at risk at any time.
Throughout the history of the Fifth French Republic, there has never been a "technocratic government" before. In contrast, Italy, which is also located in Europe, has had four "technocratic governments" since 1993. The most typical case among them is undoubtedly Mario Draghi, former President of the European Central Bank. In 2021, Draghi was able to serve as the Prime Minister of Italy during a political crisis with the support of major political parties in Italy.
Of course, as we mentioned earlier, no matter how the French government is formed after the final parliamentary elections, the long-term hidden dangers in French politics have been completely ignited after this election.
Incent Juvyns, global market strategist of JPMorgan Asset Management, said that as the reform initiated by Makron is now being questioned, tensions may arise and the value of French bonds relative to similar bonds may be damaged. He said, "As long as the new government has not clarified its fiscal situation, the market may demand higher interest rate spreads."