Political populism is far from being a spent force despite Sunday’s French presidential election. Indeed, if France has an electoral college system like the US, Marine Le Pen might have even won. Neither is political uncertainty in any way diminished with many outcomes still possible. And Emmanuel Macron’s victory seems to have increased the likelihood of one outcome: A very bad Brexit deal for Britain.
By John Richardson
MARINE Le Pen performed much better in yesterday’s second round run-off vote than her father, Jean Marie, did when he also made the second round of the French presidential election in 2002.
Neither of the candidates from the mainstream parties – the Socialists and the Republicans – made it through to the second round. This is the first time this has happened in French history.
It is also essential to remember that 41% of those who voted in April’s first round opted for anti-EU candidates – Marin Le Pen and the far-left candidate, Jean-Luc Mélenchon.
The Economist even estimates that under an electoral-college system similar that of the US, Marine Le Pen might have become president, based only on April’s first round of election results.
You may view this as stretching the statistics somewhat. But combined with Marine Le Pen’s strong showing in round two, this indicates that the French National Front is far from being a spent political force. The same applies to political populism across the rest of Europe.
The winner of Sunday’s second round run-off, Emmanuel Macron, now faces the challenge of winning a majority of seats, or at least a workable majority coalition, in France’s parliamentary elections that take place in June. His En Marche! movement has no parliamentary seats.
This further illustrates how we remain in an era of heightened political uncertainty in the West, which is the result of the end of the Economic Supercycle and the failure of mainstream politicians to devise policies to compensate for the end of the Supercycle. Until or unless the challenges raised by ageing populations is dealt with in the West then political uncertainty will remain at today’s extreme levels.
One Scenario for France and the UK
Let’s assume, however, that France’s new president governs the way he has pledged to govern – and crucially, of course, is able to fully exercise his mandate as a result of a decisive showing in June’s parliamentary elections. This creates the potential for a very unfavourable Brexit outcome for Britain:
- Mr Macron told journalists on a recent trip to the UK that he didn’t want to accept “any caveat or waiver” of the EU’s four freedoms – goods, services, capital and people.
- He believes that maintaining the strength of the EU is more important that improving France’s economic ties with Britain.
- France’s new president also said: “I will have a series of initiatives to get talented people in research and lots of fields working here to come to France. I want banks, researchers, academics and so on.”
It is thus possible to draw one scenario, where, if Britain sticks to its “hard Brexit” approach, the UK ends up in a losing position. Continued membership of the EU single market may become impossible. So could a new bespoke free-trade deal with the EU, forcing Britain to fall back on World Trade Organisation rules of international trade.
The end result may be a return to the era before the EU single market in 1993, when trucks travelling to and from Britain and mainland Europe were subject to multiple duties and customs clearance procedures that undermined UK manufacturing competitiveness.
There is also Macron’s pledge to lure young, talented and well-educated French nationals back to France. Some 300,000 France nationals live in London alone – equivalent to a small-sized city.
He could change the cultural feel of France, as well as changing rules and regulations. Perhaps France can copy , and even improve on, Britain’s “Cool Britannia” image of the late 1990s and early 2000s. It may not be only French nationals that are lured back home. The young and talented from other countries could also relocate to France.
Employers may end up making the decision very easy for foreign nationals if the exodus from London of banking and other financial institutions continues to gather pace on the prospects of a hard Brexit. The choice for expats will be very simple – either relocate back home to France and elsewhere in mainland Europe, or lose your job.
The challenge for Britain will then become how it replaces all the lost economic growth from French and other well-paid expats returning home, given that the native-born British population is ageing. The same challenge exists at the other end of the employment market. Take for example the damage that could be caused to economic growth and labour-cost competitiveness by the return home of fruit and vegetable pickers.
Politics and Chemicals Markets
You can develop s different scenario – perhaps where Macron’s firm pro-EU stance results in a political re-alignment in Britain and a soft Brexit. Right now, though, this seems a remote outcome.
Equally, as I said, Macron may either backtrack on his election campaign and/or fail to win the mandate to effectively govern in June’s parliamentary elections. A deal might thus be done that favours Britain. But that would also require other members of the EU to also “go soft” on the terms of a British exit, which again to me seems highly unlikely.
What might also happen after next year’s general election in Italy? If the 5-Star Movement ends up in government then it could follow through on its pledge to hold a referendum on Italy’s membership of the Euro currency bloc.
This, as I said, is an era of heightened political uncertainty the likes of which we haven’t seen for many, many decades in Europe and the US – perhaps since the Second World War.
This is why ICIS is building multiple and complex scenarios, based on different political outcomes, into our forecasts for global chemicals supply and demand. This work includes our new series of quarterly studies.