December 2, 2016
Last Sunday, François Fillon won the presidential primaries of the French right party Les Républicains in a surprising landslide victory, beating his more centrist opponent Alain Juppé by 69.5% of the votes to 30.5%. Fillon casts himself as the viable market-friendly, non-populist alternative to the status quo and now it appears the two-round election run-off contest will likely pit the Fillon against extreme-right candidate Marine le Pen. Early polling suggests Fillon will win and markets have already reacted positively to the prospect. However, given le Pen’s appeal, the left’s aversion to some of Fillon’s positions, President Hollande’s decision not to seek reelection, and the string of global upsets favoring populist movements, a Fillon victory is anything but certain. A Le Pen win would further destabilize the EU and generate new risks and uncertainties for foreign economic interests in France due to her maverick positions to include: limiting trade, restoring and devaluating a national currency pegged to the Euro, allowing the government to print money to finance its debt interest-free, restoring customs fees, establishing a national preference for jobs, and increasing social benefits for low wage earners and retirees. Such proposals will likely make France a less appealing environment for investment and operations.
Fillon won because his message resonated with a frustrated electorate concerned about the erosion of French values and economic stability. In essence, he presented voters with a clear agenda built around two pillars: social conservatism and economic liberalism. He campaigned on the need to “reassert [French] values” that emphasized traditional family, national history, and countering radical Islam. Second, he defended a Thatcherian economic platform of public expenditure reductions, fiscal reform, and bureaucratic simplification. Similar to the winning platforms of recent populist agendas in the UK and US, he championed greater respect for national sovereign interests and fairer trade deals.
Fillon’s messaging poses a clear dilemma for le Pen’s Front National. Le Pen appeals to diverse segments of the electorate by capitalizing on anxiety over globalization, automation, and multi-culturalism; and denouncing immigration, ‘threats’ to French identity, Islam, trade, and big business. Fillon’s focus on values could make it harder for the Front National to capitalize on the French identity theme. To counter, she will likely try to cast Fillon as a capitalistic pawn determined to dismantle the social system. Thatcherism has never been very popular in France and such a message could resonate. Absent a clearly differentiating cultural message Le Pen may not be able to mobilize all the components of her coalition.
Historical trend analysis suggests the non-Front National parties will unite behind Fillon into a Front Républicain to defeat the Front National as they did in the 2002 presidential contest when Jean-Marie le Pen was defeated in a landslide by Jacques Chirac, and in the 2015 regional elections where the Front National lost all six regions (out of thirteen) where it was in a position to win. However, given the recent anti-establishment and anti-capitalist trends, the past is not automatically prologue. Fillon’s platform contains propositions unpalatable to the center right and the moderate left; most notably on the EU and the economy. If Socialists and moderate center-right voters decide Fillon is too radical, they might elect to stay home for the run-off. Then, all bets are off and a major economic power in Europe could be led on by a maverick politician on an uncertain and untested economic course.