The next 12 months could remake the EU, and the rest of the world financial order with it.
In normal times, French presidential races are so predictable that many people snooze through months of the campaign, then snap awake in the final days to pick one of the various recycled politicians on offer. But these are not normal times. For months the major candidates in France have been mired in financial scandals, judicial probes, and back-stabbing plots in a gloves-off fight to move into the Élysée Palace.
Out front, astonishingly, are former Rothschild banker Emmanuel Macron, in his first election, and far-right National Front leader Marine Le Pen, until recently believed unelectable and under investigation for misusing EU funds. They’re both polling far higher than the long-assumed front-runner, Republican François Fillon, who faces charges for allegedly paying his wife and kids about 1 million euros ($1.1 million) in public funds for no-show jobs. The ruling Socialists’ candidate, Benoît Hamon, trails all three, as a result of President François Hollande’s rock-bottom ratings.
The soap-opera elements may be entertaining, but there’s no ignoring the stakes. The two rounds of voting, on April 23 and May 7, could transform not just the rules of business in Europe’s third-biggest economy, but the EU itself.
France’s election is just one of the political moments in Europe this year with major implications for the world economic order. In Britain, Theresa May is attempting to strike a Brexit deal with the EU that retains preferential trade deals for U.K.-based companies (good luck with that, Prime Minister). Scotland’s leader wants a fresh vote to leave Britain, complicating ties with its largest trading partner, England. German Chancellor Angela Merkel, a pillar of Western liberal democracy, could face defeat in September elections. And Greece’s next bailout package could be in peril if the International Monetary Fund pulls out of the process under pressure from the U.S.
European populism has driven much of the unrest. Forces like globalization, refugee inflows, and fights over austerity have given grist to both far-right movements in the north (like Germany’s Alternative for Deutschland) and their left-leaning counterparts in the south (see Greece’s Syriza).
Happily for world markets, populism’s rise may have peaked. In the Netherlands’ recent elections, nationalist candidate Geert Wilders increased his vote share but failed to win, as some expected. In Germany’s September contest, Merkel’s most formidable challenger isn’t from the far right but the pro-EU left. And in France, Le Pen still faces big hurdles in winning the presidency.
Right now, Macron looks poised to become France’s most pro-business leader in years, with plans to slash hiring and firing costs, trim the government’s payroll by 125,000 people, and deepen EU integration.
The result may be a stronger EU than existed at the beginning of 2017, if the pro-EU politicians win. Even if Le Pen is elected, it’s difficult to imagine her wrangling enough support in Parliament to enact radical change. Still, the risks are real. If successful, Le Pen could conceivably trigger a world financial crisis by pulling out of the euro and even the EU. The union can likely withstand Brexit. Frexit? Not so much.
—With additional reporting by Geoffrey Smith
A version of this article appears in the April 1, 2017 issue of Fortune.