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A prominent French fund manager said financial markets would keep “very tight control” over France’s far-right Rally National party if it wins the next parliamentary elections, limiting its room for big spending surges.
Edouard Carmignac, chairman and chief investment officer of the asset management firm of the same name he founded 35 years ago, said he expected political deadlock and market-imposed discipline to “significantly limit the damage that RN could cause by overspending.”
After suffering a crushing defeat in European elections earlier this month, President Emmanuel Macron’s decision to vote early has sent markets into a tailspin as investors react to political uncertainty. Opinion polls have shown the far-right and new-left coalition, the New Popular Front (NFP), in first and second place ahead of the two rounds of voting, with both parties promising to move away from Macron’s pro-business stance.
The spread between French and German government bonds, a key indicator of political risk, rose by the sharpest since the euro zone debt crisis more than a decade ago.
But Carmignac said the market reaction demonstrated that with RN’s public debt at around 110% of GDP, the bank has no room to borrow further. “You see what happened to the spreads, the market will be controlling RN very tightly,” he told the FT.
The 76-year-old’s comments are the latest sign that France’s business and financial elites are hoping that right- and left-wing populists will be less extreme if they take power. French officials have been quietly courting the RN, which has yet to unveil its full economic program but has said it would cut value-added taxes on energy and gasoline and possibly lower the retirement age.
Meanwhile, Stephane Boujnas, the French head of Europe’s biggest stock exchange, this week appealed to business leaders to “remain calm” about the elections.
Carmignac said the possibility that Macron would have to share power with an opposing party – known as coexistence – would lead to a “stalemate” in French politics.
“It’s going to be an interesting game of cat and mouse,” he said. “Policy-wise it’s pretty indecisive, a little bit confused, nothing much is being done, nothing is happening.”
Carmignac expects the RN to fail to secure a majority in parliament, further limiting the party’s ability to pursue market-upending policies. Party leader Jordan Bardella, who would become prime minister if the party wins 289 of the 577 seats, has said he will not accept the job because he would not be able to implement the party’s policies and risk a vote of no confidence if the party does not win.
“They will want to show they are a credible governing party to ensure they win the election that really matters – the presidential election in three years’ time,” Carmignac said.
The fund manager also predicted that the unity of the left-wing NFPs may not last long after the elections, as the far-left NFPs “will do everything they can to create chaos” and “moderate socialists will realise they can sail alone.” The NFPs include the far-left party Insubordinate France (LFI) and the centre-left Socialist, Green and Communist parties.
Despite his relative optimism about the election’s impact, Carmignac worries that legislative deadlock in France, a weakened Germany and the prospect of US President Donald Trump being re-elected mean Europe will struggle to present “a firm front against Russia in Ukraine and against China.”
Mr. Carmignac gained fame as a contrarian investor in 2008, when he spotted vulnerabilities in the U.S. banking sector and positioned his fund defensively, avoiding losses when the market crashed and the benchmark index fell 12 percent.
Paris-based Carmignac’s assets have fallen to more than 30 billion euros in recent years, from a peak of 57 billion euros in 2017, and its founder stepped back from day-to-day management of the funds several years ago.
