An analysis of our partner GFC Net: Shan

Earlier this morning, the centre-right candidate François Fillon has been officially informed by the judges that he would be placed under formal investigation over allegedly arranging fictitious jobs for his wife. He hold a last minute midday press conference at his headquarters, where he reaffirmed that he will keep fighting as a candidate in the upcoming presidential election. Fillon condemned the investigation, calling it a “political assassination” and an attempt to hurt the democratic process. “I will not give up” he said. This is an unprecedented situation in the French presidential elections’ history.


Concerns among investors surrounding the French presidential election has seriously raised for the past few weeks. According to many polls, the far-right leader, Marine Le Pen is racing ahead with between 25% and 27% of voting intentions in the first round. Behind, Emmanuel Macron and François Fillon are neck and neck with 20% each.

As a consequence, the Euro plummeted against the dollar few days ago. The weakness of the single currency is only due to the rising possibility of a Frexit scenario, according to analysts from Societé Generale. Indeed, Marine Le Pen warned that if she is elected in May, she will ask the French whether they want remain in the Eurozone or not. The consequence of such a referendum if the “Yes” wins would be huge, as France is a pillar country of the EU project since its start, and France is a key member of the Eurozone. A Frexit would probably mean the end the single currency project in Europe, and even the failure of entire European project!

This scenario would be more disastrous than the 2010-2012 economic crisis in the eyes of the financial community as 1.62 trillion euros has been issued by the state, one of the largest amounts in the world. What could happen if this mountain of debt was converted into francs without the agreement of France’s creditors? Needless to say this is the question that has obsessed the markets for weeks.
However, her chance of success appear restricted. Even if she wins the first round, all the polls give her defeated at the second round in every scenario. According to Thomas Buberl, AXA’s CEO, the probability of a Frexit is low.

It’s been years since the populist and anti-immigrant party, the National Front, continues to maintain rising voting intentions. The FN even succeeded to win the last European election, with 25% of votes. Today it is slightly benefitting from the Fillon scandal. Furthermore, the electoral base of the FN is the most solid. A study by the Cevipof published few days ago shows that 74% of her voters also declare they are certain to vote FN – a much higher percentage of certain voters than for all other candidates.

As a new evidence of the extreme market’s sensitivity to the French upcoming election, the simple announcement of an alliance’s offer from the centrist François Bayrou – who was candidate in 2002, 2007 and 2012, but now is only mayor of the city of Pau – to the new comer Emmanuel Macron significantly affected the financial markets. Indeed, few minutes after Bayrou’s official address, the CAC 40 wiped out the losses recorded during that day, the 10-year French government bonds rate dropped by 5 basis points and even the Euro was pushed higher!