Not as good as in the World Cup

Financial markets have penalized France since the snap elections two years ago created parliamentary standstill. French equities have underperformed, while the spread of French OATs versus German Bunds remains at elevated levels.

The market is not only reacting to political noise. The deeper issue is fiscal credibility. France is expected to run a public deficit of around 5.2% of GDP this year, while net public debt has already climbed to almost 110% of GDP, a record level. At the same time, parliamentary fragmentation makes any serious adjustment difficult.

This creates an uncomfortable feedback loop: weak fiscal dynamics push risk premia higher, higher risk premia weigh on markets, and political frustration can then be captured by more radical forces. The Rassemblement National may unfortunately be able to capitalize on this.

France is therefore no longer trading only as a large core European market. It is increasingly being priced with a political and fiscal risk premium.