Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 04 May 2017 at 8:32 GMT

Europe Divided: Notes on Wednesday's debate

Head of Macro Analysis / Saxo Bank

Marine Le Pen
Marine Le Pen accused rival Emmanuel Macron of “groveling” in front of big banks and the EU in what was a highly contentious debate Wednesday. Photo: Shutterstock

By Christopher Dembik

The final French presidential debate consisted of unintelligible yelling about economics. It took around 30 minutes to really discuss the candidates' respective programmes...
Some key points:
Anti-establishment positioning

This was Front National leader marine Le Pen's strong point. Emmanuel Macron campaigned as an anti-establishment candidate, but Le Pen reminded him that he has participated since 2012 in the elaboration and implementation of incumbent François Hollande's economic measures 

Le Pen emphasised what she wished audiences to regard as Macron's complicity by calling him "Mr. Minister", and by saying "your government" (in reference to the Hollande regime) throughout the debate.
Economic programmes

A sad moment for French politics...Two main visions of the world (protectionism and Keynesianism / regulated globalization). Economics are usually a one of Le Pen's weakest areas, but in this race, she has managed to appear as the candidate defending family values, retired people, and the losers of globalisation... without proposing any serious solutions to improve the situation!

On the contrary, she portrayed Macron as a perfidious banker, telling him that "in the society you campaign for, everything is for sale". I am personally afraid that Le Pen's stance will appeal to many voters. Macron's rational argument is certainly not the right way to convince mainstream voters – not in this election cycle.
Security and immigration

This should have been Le Pen's time to shine, but her debate performance was actually not that good. Surprisingly, Macron was much stronger than expected.
The European Union and Frexit

It is really quite easy to destroy Le Pen's controversial Frexit proposal, which would lead to devaluation, higher imported inflation, and lower purchasing power – especially for the poorest members of society. In the debate, Le Pen appeared less-than-confident on the topic and was unable to explain her recent proposal of two-currency system. 

This may push away the crucial "60-plus" vote, as older citizens are generally terrified by the prospect of a euro exit. 
I believe this debate was not a real game-changer for undecided voters (18% of voters).
Overall, I would score the debate as Macron 1/Le Pen 0, but I will caution that the right-wing candidate remainsl very good at pointing out problems... she just needs credible solutions.
The market is not at all worried about the outcome of the election, and I agree with investor consensus. France's bond spread has decreased by 20% to 50 basis points since the first round of voting, and the CAC 40 volatility index is around 19% versus 27% before the first round (it's highest point so far this year).

— Edited by Michael McKenna

Christopher Dembik is head of macro analysis at Saxo Bank 
Cat Cat
Thanks for your perspective.
Dembik Christopher Dembik Christopher
You're welcome :)


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