Centrist candidate Emmanuel Macron will be the next president of France after defeating far-right nationalist Marine Le Pen by a projected 30% margin. Macron’s victory will provide some breathing room for those concerned about the rise of populist sentiment in Europe. But it may not produce a major market jolt on Monday, and it certainly won’t end the underlying anxieties that Le Pen embodies.
Investors in Europe were already betting heavily on a Macron victory, with regional indexes rising by around 4% in the weeks leading up to the election. According to Wells Fargo analyst Peter Donisanu, that means Macron’s win could actually trigger a mild selloff as investors take profits.
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In the longer term, Macron's win is positive for European businesses, but not necessarily game-changing. The biggest global fear accompanying the French election has been that, if she were victorious, Marine Le Pen would push for France to leave the European Union. Analysts have warned that this “Frexit” would be much more economically damaging than Brexit in part because it would take France out of the Euro currency union. It could have even threatened the stability of the EU itself, and all of the benefits its open borders have brought.
Instead Macron, a former banker, has promised to embrace the EU and market liberalization. Most notably, Macron has said he will continue working to deregulate a labor system that has been blamed for a French unemployment rate stuck near 10%. Macron played a major role in reform efforts as economy minister under France’s previous president, François Hollande. Macron has also called for greater shared budgeting and investment between EU members.
In the U.S., a 30% margin of victory would be an unquestionable mandate for that agenda, but France’s two-stage runoff gives the result less force. More French voters seem to have been against Le Pen’s nationalism than in favor of Macron’s deregulation, their disgruntlement reflected in today’s low voter turnout. And Le Pen’s results still represent a high-water mark for right-wing nationalism in France.
Macron will face opposition from that growing force, then, as well as from France's traditional left. Last year’s labor liberalization push, for instance, triggered widespread street protests and the blockading of French ports by union activists, and leadership was ultimately forced to bypass legislative channels and impose the reforms by decree.
Macron’s victory, then, averts a worst-case scenario for European markets. But his ambitions to make France more dynamic and open nation face substantial obstacles.