Le Pen Rivals Gain Momentum as Political Heads Warn of Chaos

(Bloomberg) — A final push by parties intent on keeping Marine Le Pen’s far-right National Rally out of power gained momentum ahead of Sunday’s legislative election, as key political figures warned voters their decision would dramatically alter France and potentially lead to chaos.

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President Emmanuel Macron’s centrist alliance and the left-wing New Popular Front coalition strategically pulled more than 200 candidates from runoff ballots by a Tuesday deadline to avoid splitting opposition to the far right.

A survey by Toluna-Harris Interactive carried out in the past two days suggested this was having an impact, with projections showing the National Rally and its allies would get between 190 and 220 seats in the lower house, far fewer than the 289 needed for an outright majority. That was down from a range of 240 to 305 it gave after first-round voting ended on Sunday.

With just three days until the final election round, Le Pen and her allies are still on track to be the biggest group in the 577-seat National Assembly. If she can secure an absolute majority, her party would be able to easily pass legislation and stamp its agenda on the government.

According to Socialist Raphael Glucksmann, a leading figure in the New Popular Front, this would bring a “permanent constitutional crisis” at home and harm the country’s credibility in Europe.

“France is on the edge of a cliff and we don’t know if we’re going to jump,” the European Parliament member told France Inter radio on Thursday. “An abyss has opened up since June 9, an extremely tense atmosphere in the country, and an awareness that the choice we’re going to make will redraw the face of the country.”

Macron dissolved the lower house nearly four weeks ago and called a snap vote after his group was trounced in European elections. This prompted left-wing parties ranging from the Socialists to the far-left France Unbowed to form a coalition to take on Le Pen.

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“France had high debt and wide deficits even before Macron called the snap election. Unless the vote is inconclusive and a technocratic government is installed, further fiscal slippage looks inevitable. That could put Paris on a collision course with Brussels, raise the premium France pays over Germany to borrow, and inject significant downside risk to the growth outlook.”

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She denounced the second-round maneuvering to attempt to build a so-called Republican front to keep her far-right party out of power.

“I think that the French have had enough of not being treated like responsible adults who are perfectly capable of knowing for themselves what’s good for the country and what’s not,” she told TF1 TV late Wednesday.

Macron has been lying low, meanwhile, leaving the campaigning to his prime minister, Gabriel Attal. His shock decision was met with widespread incomprehension and his popularity has been dropping in opinion polls.

The decision to call a snap election sparked a major selloff in French assets, with the benchmark CAC 40 Index losing as much as 6.5% and the gap between French and German 10-year yields widening to a peak of 86 basis points last week.

Both bonds and stocks have since recovered some of their losses as the prospect of Le Pen winning an absolute majority wanes and with it the risk she would push through expansive fiscal measures. On Thursday, France’s last bond sale before the Sunday vote went smoothly, with the Treasury raising €10.5 billion ($11.3 billion), the maximum amount targeted.

Morgan Stanley strategists said French bonds had been lifted by the political maneuvering to block a National Rally majority and said stock investors should follow the lead and add exposure to the country.

They said the worst possible outcome for equity investors would have been a victory by the left-wing New Popular Front, though polls have suggested that prospect was out of reach.

Bernard Sananes, the head of polling company Elabe, cautioned that the level of turnout will be key to how well the National Rally performs this Sunday.

“If participation recedes compared with the first round, that would weaken the Republican front,” he said. “It often happens that it’s stable or reverses between the two rounds because part of the electorate no longer has the candidate they want, but this Sunday that will mean the Republican front isn’t fully working.”

–With assistance from Julien Ponthus, Farah Elbahrawy, James Hirai and Alice Gledhill.

(Updates with bond auction in 12th paragraph.)

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