France and the future of the euro zone
THE LEADER of France’s National Front party, Marine Le Pen, is predicted by recent polls to take the lead in the first-round presidential election on April 23, but only to lose either to Emmanuel Macron, a former investment banker and ex-economy minister, or to Francois Fillon, a Republican, in the second round on May 7.
The two-round ballot, designed in the 1820s, will give centre-right and liberal left-wing supporters a second chance to unite behind the runner-up against a far-right politician they fear most.
The only way for Le Pen to win the election is to capitalise on a polarised France. She has blamed the establishment for making damaging social choices that caused France to decline.
These included, in her view, excessive labour-union protection that went against younger workers and foreign immigrants, inefficient market regulation and imprudent subsidies that led to widespread corruption and huge public debts.
Their consequences, she says, ranged from high unemployment to low labour productivity, disintegrating infrastructure, high tax burdens, and short working hours with wage rigidity.
To stop this declining trend, she pledges to have stronger immigration laws, increase trade protection, have a closer relationship with Russia, leave the euro zone, and hold a referendum on France’s membership in the European Union. A Le Pen victory could cause massive capital flight out of France and neighbouring nations and depreciation of the euro, by as much as 10 per cent as estimated by some analysts.
In addition, a disintegrating EU could disrupt the economic stability of many countries outside Europe, especially China, whose euro-denominated assets account for one-third of its foreign-exchange reserves.
This is the risk that a new French populist-right president could impose on the global financial market.
Le Pen’s chance of winning the second-round ballot, however remote, remains. The likelihood of her becoming the next president or the chance of her party winning a large number of parliamentary seats in June is correlated to the rising number of people who are realising that France can no longer continue on its declining track.
The outcome of this election could be a small step in a long process of reform in France, if Le Pen or Macron wins. After years of economic stagnation, terrorist attacks, immigration and labour disputes, and widespread corruption, France will have to go through a long process of reform and negotiation if the new president does not want just small change, but a historic bid to leave the euro zone and a referendum on EU membership.
Professor ARAYAH PREECHAMETTA is a lecturer at the faculty of economics, Thammasat University.
