Have you been keeping an eye on French bond yields lately? Sure you have. Isn’t everyone these days? No one wants to get caught out YET again do they? Failing to spot the Brexit and Trump zeitgeist, many global investors are determined not to miss out again, and are asking the question daily – what’s happening in France?
It is being reported that around €16bn of French bonds are being traded each day at the moment. That’s double the usual amount and the volumes are similar to levels that were last seen five years ago in the midst of the Eurozone sovereign debt crisis. It also seems to be international – and US investors in particular – rather than French domestic investors who are actually moving the money. Perhaps Wall Street’s proximity to Trump Tower places the art of the politically possible these days into much sharper focus.
But before we get to France, the Dutch election later this month might provide the market with some early clues as to whether or not the rise of populism will continue unabated. Geert Wilders has led in the polls for months and looks set to come out on top – albeit with about 20% of the national vote in a deeply fragmented electoral system that has some 30 parties chasing about 13 million voters.
Wilders’ problem – and his delight in some ways – is that he appears to have zero path to power. None of the other major parties that are set to win double digit percentage votes will get into his political bed. Borgen-like centrism is likely to remain the order of the day here.
But of course Wilders being locked OUT of power is another great headline both for him and for his French fellow traveller Marine Le Pen. It maintains the idea that populism, anti globalisation, anti big business and financial markets and anti EU sentiment is seeping across borders. But – with much respect to Dutch voters – what happens this month doesn’t matter as much as what happens in France. And France – with an electorate of around 46 million – is not Holland.
Even with that in mind, do keep your eyes on the vote share for Wilders. (The backdrop of Trump in the White House does really make a larger than expected vote share possible. The voice in many voter’s minds – ‘if America can do it why can’t we?’ – may be all pervasive.)
If Wilders creeps up beyond 25% of the vote it will be at the real expense of the Dutch establishment. Much beyond 25% and there will be huge demands for him to have some kind of seat at the table.
And 25% is at the lower end of the vote share that ‘Marine’ (did you notice that she has chosen to drop her family name for the campaign) has been polling for the past 12 months. In many ways she can be described as the ‘stable’ candidate – in electoral terms at least. Indeed, she is something of a political enigma. Having spent the past five years detoxifying the Front National brand she articulates policies Donald Trump successfully campaigned on himself in 2016.
Pro gay rights, anti EU, pro Putin, anti globalisation, pro France first, anti Islamisation: the script is largely the same. But as Holland is not France, France is not America. The keys to the Élysée Palace are locked or opened by the French electoral system. Not an electoral college of states, not a Borgen-style fudge, but in the end a binary final-round choice where the first to get to 50.1% takes the prize.
Current polling (dare I talk about polling) suggests Le Pen doesn’t have a hope in the final round of the two-stage voting process that begins in France next month. While she may actually top the first-round poll with a vote share up to 30% of the electorate, it looks like her emerging challenger Emmanuel Macron – the rebranded centre left former minister who served under Hollande until he decoupled his fate – will come second.
In the second round, Macron is seen by the polling establishment as the clear winner with 70% of the vote in a straight shoot-off against Le Pen. But the pollsters have not exactly been precise of late. Indeed, I have yet to see any coherent answer to the questions posed to that sector and its inability to ‘capture’ modern politics in its models. French pundits will of course point you to 5 May 2002, when Chirac won 82% of the French vote against 18% for Marine Le Pen’s father – Jean-Marie – in the final shoot out.
The sense that the same thing will happen 15 years on just does not feel right anymore. Working-class France has embraced Le Pen this time round in a way that just didn’t happen to the same extent in 2002. But the betting will remain on a political ‘centrist’ winning in France. And it may well be right. However, the bookmakers, punditry and establishment don’t really have a great track record predicting these modern times.
That French bond investor is right to be trading hard right now. The future of Europe really is at stake.
To follow Iain on Twitter: @iain_w_anderson