The far-right gains a (relative) majority but most of its political program would not be possible to implement in those three years. Although we expect fiscal deterioration under this government, this should remain limited assuming the party does not want to trigger a debt crisis, which would scupper its chances to gain full power in the 2027 election.
What concerns markets the most is the risk of a unsustainable fiscal policies, as well as a less constructive attitude towards Europe. Both far-right and far-left parties ran their 2022 campaigns on more expansionary fiscal programs, and with significant opposition to the EU project. Looking at some of the key measures announced by the RN party (see table below), their program clearly implies higher government spending than the current government. However, given the relatively short time between the surprise announcement and the election date itself, most parties have not published a complete program, and the RN party has remained vague on the costings and the timing of each measure.
Any incoming government looks set to be a minority government. Alongside the constitution, financial markets and the EU, this will act as a further constraint on the new government’s ability to act, with only policies that draw support from across the political spectrum likely to be passed. Of course, a scenario where the RN obtains an absolute majority would have more room to implement its political program which in that case, also means a likely worse fiscal outlook than priced in our base.- ABN AMRO
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