German companies are watching nervously as France goes to the polls on Sunday in the first round of early parliamentary elections that could deal a blow to the country’s political center.
“When analyzing economic policy announcements from the right and left, German and French companies came to the same conclusion: France’s attractiveness would suffer,” said Patrick Brandmaier, director of the French-German Chamber of Commerce and Industry in Paris.
Marine Le Pen’s far-right nationalist National Rally (RN) has seen its position strengthen in the final voter surveys ahead of the elections, which will determine the balance of power in the National Assembly. The election will take place in two rounds.
President Emmanuel Macron called the poll nearly three weeks ago after his centrists’ painful defeat by the far right in the European Parliament elections, a historic result that reverberated far beyond France. The risky move could bring the RN to power for the first time.
Macron’s decision roiled financial markets and raised new concerns about France’s budget challenges.
Investors fear that gains from the RN or from the left-wing Neues Volksfront (NFP), which also scores well in the polls, could threaten the French economy, which is the European Union’s second-largest economy after Germany.
Brandmaier said the possibility of a sharp increase in government spending from Paris, which would likely further shake the market, has spooked companies already worried about the sustainability of France’s fiscal path.
Rising premiums on French government bonds would put further pressure on France’s already strained budget, analysts have stressed in recent days.
According to Brandmaier, the possibility of either the far left or the far right rolling back the business-friendly reforms implemented under Macron’s presidency, plus the likely increase in taxes, also has German companies on edge.
