abrdn: French reforms are delayed

abrdn: French reforms are delayed

June 20, 2022

Politics France
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This is a commentary by Pietro Baffico, Economist at abrdn, on the results of the French parliametary elections:

The second round of the French legislative elections gave way to a hung parliament, leading to a significant slowdown in the reform agenda. Cabinet reshuffle and negotiations will follow over the next weeks, potentially even leading to a new Prime Minister to facilitate a coalition government with the Les Republicains. But the conservatives are split internally, thus a coalition government is not a given. If no stable majority is formed, a more complicated alliance with the centre-left may arise, but with more risks for government crises. A minority government might need to seek a bill-by-bill support, and policy paralysis could emerge. In that case, the risk of new early elections would also not be ruled out.

Macron’s reform agenda will be significantly diluted. While Les Republicains would support measures close to their programme, they would also require concessions, limiting social spending and aiming for a stricter fiscal discipline. The President retains control of foreign and defence policies, albeit will likely face more opposition on further EU integration. The political pressures arising from the cost-of-living crisis will likely strengthen his efforts to push for a diplomatic compromise on the war in Ukraine.

These elections are a demonstration of political challenges in an inflationary environment. Voters were more disengaged, with a record low turnout around 46%, and more discontent with the incumbent President than in 2017, as reflected by the high voter abstention in the presidential runoff. Centrist and moderate parties come out in a weakened position, while there was historically high support for populist parties, most notably the far-right, amid the ongoing cost of living crisis. The result is a fragmented political spectrum, with parties forced to compromise on policies to avoid paralysis.

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