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Yesterday’s French election as expected saw president Nicolas Sarkozy headed for the May 6 run-off with his main challenger, the Socialist candidate Francois Hollande. This has been the first time in 54 years that the incumbent has failed to win the first round.Opinion polls in the run up to the election have shown Hollande to be a round-two favourite. But in his latest report, Alastair Newton, Nomura’s senior political analyst says that the second round could be influenced by the latest Ifop poll which suggests that 50 per cent of Le Pen’s supporters will now vote for Sarkozy, and about 33 per cent will vote for Hollande. Remember, Marine Le-Pen shocked everyone by securing about 20 per cent of the vote.
For now, Newton sees three likely outcomes of a Hollande win:
- Sarkozy’s Union for a Popular Movement (UMP) party could retain a centre-right majority in the legislature which would be well received by financial markets, since it would allow Hollande to move back towards a more centre-left position economically.
- An outright Socialist majority which would see Hollande enjoy strong support from his own party in government but see him take a more left-leaning stance over crucial issues like fiscal policy.
- A socialist plurality which could see a left-of-centre coalition with the Front Gauche. This would unsettle financial markets because of concerned over domestic policy but also because of the left-wing’s antipathy over the fiscal compact. This is crucial part of chancellor Merkel’s plan to fight the debt crisis and is already at risk in the Netherlands.
For now Newton thinks the second outcome is most likely, but just as important as the presidential elections, are the legislature elections scheduled for June 10 and 17.