Surprise in the French Presidential Election

The French Presidential Election will proceed to a second round after both Francois Hollande and Nicolas Sarkozy failed to win 50 percent of the vote on Sunday. Hollande took 28.6 percent of the vote, while Sarkozy achieved 27.1 percent. However the day belonged to anti-immigrant, anti-euro advocate Marine Le Pen of the National Front party, who achieved a strong 18.1 percent of the vote. Le Pen’s performance highlights the French people’s frustration with the political elite and economic problems in the world’s fifth largest economy and Eurozone’s second largest economy. The unemployment rate, at nearly 10 percent, is a 12-year high and the country lost its AAA credit rating for the first time in January. After the vote the euro declined to $1.32 against the dollar while 10-year bond yields rose 5 basis points over fears that France could undergo further radicalization. Sarkozy, the first incumbent not to win in the first round since 1958 must gain the support of the more radical right in order to win, while Hollande must make up for a generally poor showing for the left where communist Jean-Luc Melenchon only gained 11.1 percent of the vote. Surveys predict that Hollande will beat out Sarkozy by a 56 percent to 44 percent margin in the next round, scheduled to take place on May 6. Investors hope for a strong showing by one of the candidates to avoid risking further destabilization in the Eurozone.

-Ashish Sathe