There remain few winners in the French general election. The best that can be said is that there will not be a Rassemblement led government during the Olympics. The risk now is of ongoing political uncertainty and friction, and in the context of a move towards the far-left (some of whose worst instincts encompass support for Hamas and 90% income tax rates), a confrontation with bond markets.

The takeaway of the election is that the Rassemblement has not triumphed. A number of factors have played a role here. In the past couple of weeks, tv and radio interviews have exposed the lack of real policy knowledge of Jordan Bardella (notably revealing his comments on the rights of bi-nationals), not to mention the incoherence of many of his RN colleagues.

In addition, tactical voting across the country has managed to limit the advance of the RN (who are now engaging in the familiar cry that ‘the election has been stolen’). Bear in mind that the RN won 37% of the votes but will have fewer seats than the far-left NFP group who garnered 27% of the vote, which shows the power of tactical voting but also should sound a warning ahead of the presidential elections (2027).

There are several strands emerging. The first is that while Macron has avoided a RN majority, he has ushered it into the mainstream of French politics, crippled his own party and resurrected the far-left in France. He remains severely diminished in the sense that the majority of French people resent him, prior political allies from Edouard Philippe to Gabriel Attal are distancing him, and that political power will now pass to parliament.

Attention will now turns to the formation of a government. The French constitution doesn’t offer a clear guide here – it is set up to shape majority governments. There are perhaps three scenarios to bear in mind.

– A technocratic government of experts and well-regarded figures in public life. This scenario is a low probability one for the moment, at least until other possibilities are exhausted.

– An NFP centred government, with ‘silent support’ of the centre. We think this would be difficult to achieve given the policy programme of the La France Insoumise in particular, and they would have to severely moderate this and give up the chance for Jean-Luc Melanchon to serve in government (everyone is against this).

– A ‘grand coalition’ government of the centre, which is enabled by the breaking of the socialists with LFI to join Renew and possibly the Greens/Ecolos, and some of the right wing deputies. This ‘German’ style government could come close to a slim majority but would necessitate a break in the left wing coalition. The difficulty for Macron would be the role that Francois Hollande might play, the concessions he would need to give to the Greens and the choice of prime minister.

At the time of writing, the far-left is insisting that it will propose a candidate for prime minister, but it is so far searching for an acceptable name.

What’s next?

Gabriel Attal has submitted his resignation which has been refused by the president – and we suspect that this government could be kept in place till after the Olympics, with a lot of manoeuvring going on at the same time. The only template for a caretaker government is 1958, when it lasted 9 days.

The leader of the Assemblée will be selected on the 18th July, and then September looms in terms of a budget.

Economically, a new government could be less coherent, less experienced (Bruno Le Maire was in place for seven years) and will want to spend more, with a possibility (esp if the NFP is involved) that it will be instinctively less friendly to investment and capital markets. As such, France is up against the limits of fiscal space, and the risk of a run in with the bond market is high.

In sum, this was a very costly move by Macron. France and its parliament is divided, the far-left is in a powerful position in parliament, the far-right has garnered 37% of the vote and there are growing financial risks to the political outlook in France. Macron as a political force is finished.

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