📝New French Election Unlikely to Change Parliament Arithmetic: Barclays

Meanwhile, in France, the main opposition parties have

confirmed they will vote against the government in the confidence vote next week on Sep 8th. As per our report last week, we think the most likely scenario is for Macron to appoint a new PM, potentially from the social democrats, who will be tasked to re-draft the budget. This may take time and result is less fiscal consolidation, but feels like the least bad option for markets, likely to result in modest spread tightening and equity relief (see Equity Market Review France – bis repetita, 29 Aug). Of course, risk remains that political impasse and/or social unrest ultimately force the President to dissolve the national assembly and call new elections. Latest polls suggest no party would get an outright majority, but RN (far right) could gain seats. So lack of clarity on the path ahead and worsening fiscal dynamics mean the risk premium on French bonds and domestic equities is unlikely to fall materially soon, in our view, with the Presidential election looming in 2027. - Barclays