French Finance Chief Warns Left-Wing Win Would Mean EU Exit

(Bloomberg) -- French Finance Minister Bruno Le Maire warned that victory by a new left-wing alliance in the upcoming snap vote would lead to the country’s exit from the European Union as he put fears over the economy at the center of the campaign.

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The program of the Popular Front, which is made up of four left-leaning parties, would cause “economic collapse,” he said on Franceinfo radio. The coalition is due to present its election pledges later on Friday and hasn’t suggested leaving the bloc.

“Their program is complete madness,” Le Maire said. “It will guarantee downgrade, mass unemployment and an exit from the European Union.”

Le Maire has joined President Emmanuel Macron in warning of the consequences of far-right or far-left parties coming to power. But those alarms may fall flat this time around, given the precipitous drop in support for the president’s party and after some of the more extreme groups have moderated their platforms.

Traders wiped more than $100 billion off the value of French stocks, with banks Société Générale SA, BNP Paribas SA and Crédit Agricole — all big holders of government bonds — losing more than 10% each.

The CAC 40 Index is nearly down 6% on the week, heading for its biggest weekly drop since March 2022 and getting close to surrendering its gain for the year. The slump put France at risk of losing its crown as the largest equity market in Europe.

The Greens, Socialists, Communists and far-left France Unbowed party late Thursday announced they would contest the ballot as a single group, with polls showing it can win the second-biggest bloc behind National Rally.

According to a draft manifesto of the alliance seen by Bloomberg that could still be amended, the parties would refuse the “austerity constraints” of the EU’s fiscal pact governing debt and deficits. Domestic economic policies would include increasing paid annual leave to six weeks from five, reinstating a wealth tax abolished by Macron, and abolishing his pension reform to reinstate a right to retire at 60.

For the finance industry, the draft manifesto said it would strengthen financial transaction taxes and force banks to increases reserves to deal with climate risks.

What Bloomberg Economics Says...

“Markets have already demonstrated sensitivity to the political situation in France. Its high debt burden makes France vulnerable to shifts in investor sentiment and there is a clear danger that spreads could widen further if the election prompts a big change in policy direction”

—Eleonora Mavroeidi and Jamie Rush. For full react, click here

Members from the conservative Republicans are also poised to clinch an alliance with Marine Le Pen’s far-right National Rally ahead of France’s snap legislative election.

“We’re in the process of working and finalizing this agreement both on the proposal platform and on the nominations,” National Rally spokesman Sebastien Chenu said in a Friday interview on France 2. Around Republicans leader Eric Ciotti, “there will be a large number of candidates, some 80 from the Republican family,” he said.

These moves signal a potential disaster for Macron’s party. Because France has a two-round electoral system with a bar to move onto the second vote, many of Macron’s centrist Renaissance candidates may not even make it to the final election day.

Le Maire said in the interview that the National Rally’s program is built on “lies” and said its pledge to lower VAT on heating oil, gas, electricity and food will cost the state €24 billion euros ($25.7 billion). He said the National Rally and Popular Front’s programs will not be able to finance France’s debt.

Further complicating matters, the Republicans are locked in bitter infighting as most of the party’s senior members are trying to expel Ciotti over the pact with National Rally. He refuses to step down and is appealing at the Paris tribunal.

Macron dissolved the National Assembly on Sunday and announced legislative ballots on June 30 and July 7. This came after his political group was trounced by National Rally in European Parliament elections.

The National Rally is on course to win as many as 270 of the 577 seats in the National Assembly, compared with 90 to 130 for Macron and his allies, according to a projection by pollster Elabe.

Adding to the disorder, France’s CGT union called for strikes across the country Saturday to warn against France falling into “fascism.”

The decision to call a snap election caused political chaos and spooked investors as the vote raises uncertainty over how the next government will address France’s public finances. Le Pen’s party is on track to win the most seats, which would hand it the premiership and give it leverage in forming a new cabinet, including more influence in economic policy.

--With assistance from Michael Msika.

(Updates with markets from the fifth paragraph. An earlier version of this story corrected the spelling of National Rally in chart.)

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