France elections

The outcome of the French parliamentary election remains uncertain. Opinion polls continue to hint at a far-right victory but with a wide range of projected seats. The momentum could shift in either direction between the two rounds.

The most plausible scenarios all entail significant fiscal and financial risks, including a far-right government with or without an absolute majority, or a hung parliament resulting from a strong rise of the left. The most positive outcome of a broad centrist coalition may only materialise as a result of an institutional crisis.

Irrespective of the immediate reaction in financial markets, we expect the French (fiscal) risk premium to remain structurally higher for longer.