French Finance Minister Bruno Le Maire warned on Friday that the euro zone’s second-largest economy faces the risk of a financial crisis because of big spending plans if either the far-right or the far-left wins the next parliamentary elections.
Political uncertainty has already triggered a sharp sell-off in French bonds and stocks after President Macron’s ruling centrist party suffered a crushing defeat to Marine Le Pen’s euroskeptic National Rally (RN) party in Sunday’s European Parliament elections, leading to his sudden call for general elections.
Asked if the current political instability could lead to a financial crisis, Le Maire replied: “Yes.”
“I’m afraid they (the far-right and far-left) cannot afford these costs,” Le Maire, who had planned billions of dollars in savings to get France’s finances back on track, told France Info radio.
The first set of opinion polls predict that the RN, who has promised to cut electricity tariffs and VAT on gas and increase public spending, could win the election and be put in position to run the government.
At least two opinion polls have shown the left not far behind the RN and ahead of Macron’s centrist bloc.
The polls were conducted before left-wing parties reached an agreement on a joint platform to take on the far-right and Macron’s camp with promises to link salaries to inflation and introduce a wealth tax on the rich.
The RN calls for a protectionist “France first” economic policy.
The government is expected to announce details of its economic policy in the coming days but so far has only made broad comments about increasing household purchasing power and lowering energy prices.
‘Slippery slope’
Judging by its proposals for the next parliamentary elections in 2022, which it has pledged to remain largely consistent, the government is likely to cut VAT on energy from the current 20% to 5.5% and increase public spending, despite already significant levels of public debt.
RN leader Jordan Bardella, visiting a farm in Seuel, south of Paris, said some of the money would come from measures to close tax loopholes.
He said tackling the cost of living would be one of his priorities, along with cutting immigration and getting tough on crime.
“France is on a dangerous path, on the brink of bankruptcy,” he said, urging French people to “dare to choose change”.
Banking shares fell sharply this week as stability concerns led the premium investors were demanding to hold French government bonds to its biggest weekly increase since 2011.
Executives at France’s biggest technology companies have warned that immigration restrictions proposed by the far-right Rally National party pose a threat to the country’s ambitions to become Europe’s leading AI hub.
Meanwhile, left-wing parties put their differences aside and reached a deal late on Thursday that included repealing Macron’s unpopular pension reforms.
“Emmanuel Macron will not get a majority,” said Marine Tondelier, leader of the Green party.
“It’s either the far right or us,” she said, urging left-wing voters to support a new coalition called the “Popular Front”, bringing together the Socialists, Greens, Communists and the far-left Indomitable France (LFI).
Trade unions and human rights groups called on people to take part in rallies against the far-right over the weekend.
