New French President may be less focused on budget discipline
Presidential elections due on 22 April and 6 May. Conservative Sarkozy and Socialist Hollande are neck to neck for the first round, while Hollande looks like a winner for the run-off.
- A Hollande victory looks very likely. No single poll has pointed to a Sarkozy win in the second round.
- Elections will have little market impact, though they add to the general uncertainty. Even Hollande’s campaign promises to amend the EU fiscal pact and make the ECB more growth-oriented have had little market impact.
- What could go wrong?The market view seems to be that Hollande will quickly drop his campaign promises and focus on budget consolidation. But …
- Hollande may be less focused on budget discipline.
- National Assembly elections in June could make it difficult for Hollande, especially if Mélenchon does well.
- French bonds do not provide enough compensation for the risk that the new president may be less focused on budget discipline and does not seem to have the solution to the longer-term challenges.