Impact of French Elections on EURO currency

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Impact of French Elections on EURO currency

 

The European financial market is one of the biggest financial markets in the world, catering to mostly interbank operations. A very interesting feature of this market is that though, the Euro market has big corporates asking for loan, the market is generally made up of unsecured loans, which requires the lender to give special attention to check the credit worthiness of the borrower.

Now, as we have seen in the previous decades, politics and finance are like two ends of the same rope. Any big change in the political scenario of a nation has a crucial impact on the working of its financial circle. The same is going to be the case with the European financial markets, that are going to be affected and impacted by the French Presidential Election of April 2017.

France, being one of the biggest and the most influential economies of the European Union and also one of the founding members of the organization, plays a central role in the European politics. Not only this but the country also has a strong say in the decisions the EU takes and their implementation factors. Given such significance, it is needless to say that France elections will have a major impact on the Euro and the financial markets in general.

 

The catch is to see whether this is going to lead to a long term growth trend or a weakening tight status.

Talking of the French markets in particular, it is often said that markets hate uncertainty, which may be how we explain the poor performance of the French indices towards the beginning of 2017. But as predicted by analysts, the repercussions this time are going to be far more serious and it is expected that the effects are going to be against the Euro.

Another highlighted part of the story is Frexit; i.e. the exit of yet another country from the European Union. On the other side, the analysts predict that though the impact of the elections is not going to be well on the financial markets, it doesn’t signal the country’s exit from the EU yet. However, even that becomes a strong possibility in case we have Marine Le Pen taking the seat. On the contrary, as suggested by the opinion polls as of now, the counterparts are expected to back the position.

If we look at the situation, predictions also talk about Jean-Luc Mélenchon, who, if clears the race on 7th May’17, may call for Frexit.

Another highlighted point here can be one of the promises made by Le Pen, just in case she wins the elections. She committed to take France out of the European Monetary Union (EMU), and just hold a referendum on the EU membership, in case they don’t agree to and abide by her proposed reforms. And as per the law, if she requires a referendum, there is no way to do it without seeking the parliament’s approval and there we go again!

So basically, the President that is going to be elected finally on the 7th of May, post the first round that gets completed on 23rd April, we get to know what’s in store for the European markets. Though it might change the highlights for the good; as of now, it seems that the Euro is going to fall miserably.

 

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