(Finance) – Following the results of yesterday’s legislative elections, the political landscape in France appears “highly fragmented”with three major political blocs and no absolute majority emerging from a single bloc. For now, President Macron has asked Prime Minister Attal to remain in office with a caretaker government. The composition and timing of the government’s formation remain “unclear.” It is “likely that the next Prime Minister and the next government will also rely on fragile parliamentary support.” He writes Morningstar DBRS in an analysis on the topic.
Accordingly, analysts believe that “the defining economic and fiscal policies will be difficult” and that “significant delays in correcting the medium-term fiscal outlook from current expectations could have credit implications for France.”
“The composition of the National Assembly should allow for broad political continuity for France’s European, foreign and climate policies,” he said. Mehdi FadliSenior Vice President of the Global Sovereign Ratings Group at Morningstar DBRS – However, economic and fiscal policy are likely to face gridlock, while upcoming fiscal events will be key to France’s fiscal trajectory.”
According to Morningstar DBRS, the dismantling of the pension reform 2023 seems unlikely, but adjustments to this reform with the support of a majority of newly elected members of the National Assembly cannot be ruled out. A coalition agreement may also be necessary.
“We believe that France’s ability to implement its fiscal consolidation and economic reform agenda will likely be hindered for at least a year“, the report reads.
The composition of the National Assembly should allow for broad political continuity in the following three areas: 1) France’s position towards the European Union and the cohesion of theFranco-German axis; 2) France’s foreign policy, including its position in the BORN and his support for theUkraine; and 3) France’s climate policies, including the pursuit of the national low-carbon strategy.
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