Emmanuel Macron is coming under pressure to cancel his controversial pension reforms after the shock French election result gave the hard-Left the most seats in parliament.
The euro dropped after Marine Le Pen endured a shock defeat at the hands of the hard-Left and the French president’s centrists on Sunday night as French voters turned out in force to keep her party from power.
In disappointing results for the National Rally (RN) leader, the New Popular Front, an uneasy alliance of centre-Left, green and far-Left parties, claimed the most seats in the snap parliamentary election, winning 182 in the 577-seat Assembly.
However, economists have warned the result means Mr Macron’s pension reforms are dead, while France will also struggle to meet the EU’s fiscal rules on spending.
The French president controversially passed a law last year which raised the retirement age from 62 to 64, prompting waves of strikes and protests across the country.
Holger Schmieding, chief economist at Berenberg Bank, said it would also mean France’s government borrowing costs move higher than Spain’s as a “less favourable reputation among global investors will likely reduce trend growth and raise inflation in France”.
He said: “Although French voters did not grant a majority to either the RN or the spendthrift left, the election result is still negative for France in two important respects: First, it spells the end of Macron’s pro-growth reforms.
“Instead, the centrists will almost certainly have to accept some reform reversals (eg a potential softening of Macron’s crucial pension reform) and possibly progressive tax hikes demanded by the left in order to pass a budget.
“Second, it threatens to exacerbate France’s fiscal problems. After a deficit of 5.5pc of GDP last year and a similar shortfall this year in the absence of any corrective action, France will struggle to pass a 2025 budget that complies with EU fiscal rules.”
