The French presidential elections represent the highest stakes of a busy election calendar for the first half of the year that will be dominated by elections and referendums in Europe.
A victory for Front National party leader Marine Le Pen would have seismic consequences for markets, increasing fears over the viability of the European project, particularly the euro.
If Le Pen leads the vote in the first round, it will provoke a spike in market volatility
While we assign low probability to Le Pen winning the election, a scandal affecting the main contender, François Fillon, has caused increased nervousness about the eventual outcome. As markets come to terms with the election of Donald Trump and Brexit, fears of a similar contagion in France have meant a substantial re-pricing of French assets, as investors are demanding a much higher risk premium for them. If Le Pen leads the vote in the first round, it will provoke a spike in market volatility.
A referendum in Turkey and Iran’s presidential election are other high stakes polls to watch in the first half of 2017. President Erdogan of Turkey’s efforts to shift power to the presidency and its implications for the rule of law and of institutional integrity may cause concern amongst investors. There has been a huge sell off of the lira, with the currency depreciating 82 per cent since early 2014, when Turkey’s political risk began to rise.
Iran’s president seeking re-election
Meanwhile, in Iran, President Rouhani will be seeking re-election in the face of hardliners opposed to closer economic co-operation with the West. The factors influencing Iran’s presidential election become even more acute in the context of President Trump’s anti-Iran rhetoric, which could ultimately play in the hands of the hardliners’ longer-tern agenda.
Beyond the high-stakes elections, upcoming ballots in Netherlands, the UK and Bulgaria should be on your watch list too – read our report for more (click on ‘download report’ above).