Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

5 Things to Know About the French Election


Investors around the world will be watching France this weekend. Here's why.

America's circus-like atmosphere surrounding the Republican primaries and build-up to the 2012 election has been an interesting display of politics. But it should be mentioned that the US is not the only country with an entertaining political contest this year. In fact, France's presidential election has already had its share of odd events.

In a rather tumultuous year, the French people have a lot to consider when going to the polls. Between domestic terrorism, economic troubles, and the private life of Dominique Strauss-Kahn, it's been a difficult time for France. The first round of the French presidential election will take place April 22, with the runoff election scheduled to take place May 5. Here are 5 things you should know about the race.

5. French presidents hold office for five years.
Europe has seen a series of near catastrophes over the last few years. With France holding such an important place within the EU, the president will have a major impact on how coming disasters will be managed.

The French people and the world will have to live with a presidents' policies for five years. The term used to be seven years, but was voted on and amended to the now shorter term in 2000. In 2008, the president was legally limited to serving the maximum of two terms.

With this election, these time limits could mean two things. First, incumbent President Nicolas Sarkozy of the center right Union for a Popular Movement could have another five years in office carrying out his plans for both France and the EU. If he's not reelected, Sarkozy has publicly stated that this will be the last time he seeks a political office.

Second, another candidate (most likely the growth-minded and anti-austerity Francois Hollande of the French Socialist Party) could have anywhere from five to 10 years in office. It would be a new decade (or half decade) for France.

4. There are many candidates running.
In this year's election there are 10 candidates running for the presidency, with only three having an actual chance to contend for the office.

The two front-runners are Nicolas Sarkozy and Francois Hollande, with Marine Le Pen as the third most viable candidate. At the time of this writing, Nicolas Sarkozy is looking at 27% of the vote going to him. Francois Hollande is looking at 27% of the vote, making both front-runners tied before the first round. The anti-illegal immigration candidate Marine Le Pen of the far-right National Front holds steady with 15.5% of the vote.

If neither Sarkozy nor Hollande can secure 50% of the vote in the April 22 election, the two leading candidates will have to face each other in the runoff election. Currently, the polls are indicating Hollande will overtake Sarkozy in the runoff.

Sarkozy is running for reelection to little fanfare. In early March he hid in a bar to avoid the pelting of an angry mob of Hollande supporters and Basque nationalists while campaigning in the Basque region. The most positive attention he has received came with the handling of the Merah shootings (see below).

Francois Hollande, the Socialist Party candidate, is proposing cultural revival as a means to reinvigorate the French economy. Of course, he's also proposing a tax rate of 75% for those making over 1 million euros. That would not affect many people financially, but it could ruin one of France's favorite past times: football. Good footballers (soccer players to Americans) earn more than 1 million euros, prompting some to speculate about talent fleeing for greener pastures.

The far-right National Front is running their leader, Marine Le Pen, as their candidate. Le Pen is running on an anti-immigration platform and has gathered little support with those in mainstream parties. Many will not publicly endorse Le Pen for fear of being seen as supporting a racist agenda. In fact, some of the elected officials who supported the National Front in 2007 had their property vandalized.

3. France has its own austerity issues.
Back in January, France's credit rating was downgraded by Standard & Poor's from AAA to AA+.

After this, two of France's largest banks had their credit downgraded. Credit Agricole (Paris: ACA) and Societe Generale (Paris: GLE) both went from an A+ rating to an A. The largest bank in France and one of the largest financial groups in the EU, BNP Paribas (Paris: BNP), maintained its rating.

Holllande's pledge to raise the tax rate and his current poll numbers are making a lot of people feel uneasy. Businesses are taking Hollande seriously when he talks about his plans and his desire to renegotiate the EU fiscal compact.

Along with his pledges to raise the minimum wage, add more public school teachers, and readjust the retirement age from 60 to 62, Hollande's possible lead in the runoff has caused bank stocks to decrease in value. Since France is backing the European bailout fund, their credit downgrade does not inspire confidence in French banks.

Austerity itself is up for debate in this election. Sarkozy is a conservative and strong supporter of the German-styled budget treaty of Europe, making him a key ally to German Chancellor Angela Merkel. Hollande argues that the treaty should be renegotiated and that countries should follow what's best for their own budget reductions. This stance against austerity has already received praise from German and Spanish Socialist leaders.

2. Terrorism and tolerance are now big issues.
Twenty-three-year-old French-Algerian Mohamed Merah shot and killed three soldiers, three children, and a rabbi in southwest France in March. On March 22, he was killed in a police raid on the apartment building where he hid. The attacker, a French national with no ties to al-Qaeda, made French-Muslim relations significantly tenser in an already heated atmosphere.

Many have also questioned the effectiveness of France's anti-terrorism methods and forces. Hollande expressed his concern over the possibility of a future failure to keep track of potential terrorists.

The Parisian suburbs are filled with people who feel they are not represented in the coming election. Sarkozy, they feel, has not made any lasting contributions to their lives. Hollande, the Socialist, is distrusted since the Socialist senate once passed a bill that outlaws religious signs, seemingly targeting the Muslim population. And in the case of Le Pen, the mostly immigrant residents of these poor suburbs feel they are being vilified for the purposes of a party's platform. The candidates have not campaigned in these areas and the residents do not hold much regard for anyone running.

1. This is really about Europe.
The previous points all lead to one thing: The French election has major ramifications for Europe.

France is on track to becoming one of the most powerful voices in Europe. Sarkozy himself has publicly elevated his county's importance in the international community. He has implied in the past that he considers the French presidency more important than a position with the EU. (In 2014, two positions in the EU will become available: European Commission president and European Council president.)

But this power works both ways, and France can demand a lot from Europe as well. Sarkozy has threatened to pull out of the open boarder agreement -- the Schengen agreement, which permits travel between 23 European nations without a passport -- if there aren't significant advances in stopping illegal immigration. Instead of passport-less travel to and through France, he wants to halve the number of immigrants coming into France.

Sarkozy isn't the only one to play up the nationalistic angle. The arguments Hollande makes for his policies are done so against the backdrop of the eurozone, and a Hollande win would make France take a direction the majority of the EU doesn't agree with. France's greatest ally through the eurozone crisis, Germany, is alarmed at the possibility of Hollande scrapping the agreement and austerity. His actions would send the bond markets reeling and hurt investors' confidence in debt reduction.

These elections are about more than who will run France for a few years; they change how Europe will be run for the next few years. And come Sunday night, we'll at least have an idea of what the French look for in a leader.

(See also: 5 Things You Need to Know About François Hollande)

< Previous
  • 1
Next >
No positions in stocks mentioned.
Featured Videos