Euro falls as Le Pen rises

A smiling Marine Le Pen enters through the double doors into an ocean of French flags, waving tirelessly. Greeting supporters and shaking hands, reminiscent of a celebrity, the ‘France First’ candidate follows the gestures of men in suits to take her place on the stage.

Le Pen waits, arms spread wide in the air, an untouchable hug for her cheering crowd, eventually silenced.

“Dear citizens of Nantes, and overseas. In a few weeks…,” she pauses for dramatic effect.

“You will elect the President of our French Republic”.

The pause was not required, as the drama had already begun. The French presidential elections have been wrought with scandal, tensions, wheeling, and dealing.

Since Monday, far-right National Front leader Marine Le Pen has enjoyed a rise in the polls after former prime minister Alain Juppe revealed he would not replace Francois Fillon as the centre-right candidate.

Polls on Friday showed that Juppe’s candidacy would have given him a strong likelihood of winning the election’s first round in April, pushing Emmanuel Macron into second place, and effectively knocking Le Pen out of the running.

Juppe’s news led the euro to shed more than 0.35 percent, down to just 1.05 against the US dollar. This marks one of the lowest points for the euro since Italy’s constitutional reform was shot down in December.

euro fall

The euro has continued it’s descent since Monday. Image: Bloomberg

The currency of the European Union’s (EU) continued fall marks the lack of faith that investors have in Le Pen, who has promised to remove France from the European Monetary Union, reintroduce the French franc, and hold a referendum on EU membership if the EU refuses to comply with her terms.

Le Pen is currently tabled to win in the first round of voting, but within France’s voting system a second round is held for the top two candidates, where polls show she is likely to be knocked out.

However, it wouldn’t be the first time that opinion polls were incorrect, with both Brexit and the US Presidential election polls depicting eventually incorrect outcomes. Le Pen remains confident that she can pull off a Trumpesque win.

Economic outcry

Le Pen promises a return to the franc. “I can’t implement my promises of intelligent protectionism and industrial policy with the single currency,” Le Pen said last month. “It’s a brake on the economy, it’s an obstacle to the recovery. The euro isn’t a currency, it’s a political tool.”

However the return to the franc is much more sinister than Le Pen implies. It would also involve the conversion of €1.7 trillion of French public debt into francs, resulting in what rating agencies predict will be ‘nearly 10 times larger than the €200bn Greek debt restructuring in 2012, threatening chaos to the world financial system on top of the collapse of the single currency.’

European Central Bank executive board member Benoît Cœuré said this would lead to “impoverishment”, higher interest rates, a heavier debt burden, unemployment and inflation.

What does it mean it layman’s terms? Chaos for the EU.

Bank of France governor Villeroy de Galhau cautioned last month on France Inter Radio that “the recent increase in French rates — which I believe is temporary — corresponds to a certain worry about the exit from the euro.”

The turning up of France’s nose at the single currency could mean the end for the European project, which once sought to unite states and provide greater power by acting as one.

France’s departure from the EU will experience aftershocks even greater than Brexit, after enjoying their status as a founding member, and enjoying more political influence than the United Kingdom.

“If Le Pen wins the elections, it would clearly mean the end of the EU as we know it,” Al Jazeera reported this week, “a Frexit vote would leave Germany as the only major global economic and political actor.”

But it’s worse news on a worldwide scale. Le Pen’s regime of protectionism means expelling much of the “globalist” foreign capital in France, pushing their number one market, the United States (US).

US financial and tech companies will be distressed under Le Pen, as she proposes additional tax on non-French citizens, remove outsider tax schemes, and publicise “economic patriotism,” making mergers and acquisitions even more difficult.

The annual $31 billion in US exports will be at stake, with Le Pen’s hostility toward imports and an intention to support French export.

Lack of an alternative

The competition is becoming fierce for the presidential spot, however there is no clear-cut winner in sight.

François Fillon, Republican candidate was set to be the next President of France after the current Socialist President, Hollande suffered approval ratings as low as 4 percent. However, after allegations were made about misusing 1 million euros in parliamentary funds for non-existent jobs for his family, Fillon, while shouting political assassination, is remaining in the race, despite a drop in the polls.

His economic reforms come with their own set of complications, with plans to shift cut the public sector, and shift to a free market, which if successful will boost the eurozone’s second biggest economy.

Emmanuel Macron, touting his own En Marche (“Forward”) movement, promises to be a neutral candidate, breaking down past political structures. But, with a new party comes its own set of complications, and Macron will struggle to field enough candidates for the parliamentary elections in June, making it difficult to push through reform with a hostile or indifferent parliament.

Socialist candidate Benoît Hamon is presenting new age notions, like a Universal Basic Income and robot taxes, however lacks the support to win, along with Jean-Luc Mélenchon, a Leftist coming last.

With such a dip in the euro even before the election is held, and a political shake-up on the horizon, if Le Pen pulls a Trump in the votes, it’s possible that ‘France First’ will be first in the race to the bottom.

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