[Choi Junyoung's World+] Macron's Gamble: France Dissolves Parliament for the First Time in 27 Years

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Choi Jun-young, Senior Advisor at Yulchon LLC (Global Legal Affairs and Policy)

The situation in France is becoming serious. The CAC40 index, centered on blue-chip stocks, plummeted 6.2% in just one week, marking the largest drop since 2022. The situation is even worse for mid-cap stocks, which fell 9%, the largest decline since the turmoil caused by COVID-19 in 2020. The bond market is also unfavorable. The spread between French and German 10-year government bonds widened to 78 basis points (1bp = 0.01 percentage points), the largest since the Eurozone crisis in 2012. As preference for French government bonds rapidly deteriorates, the borrowing costs for the French government are sharply increasing. Anxiety about the French economy and its future is spreading.

The turmoil in the French financial market is due to growing concerns over President Emmanuel Macron’s decision to dissolve the parliament and hold interim elections. On June 9, after the far-right party National Rally (RN), led by Marine Le Pen, secured 31.5% of the vote in the European Parliament elections, while Macron’s ruling party Renaissance only garnered 14.6%, President Macron decided to dissolve the parliament, which still had three years left in its term, and hold interim elections under Article 12 of the Constitution. This is the first such dissolution since President Jacques Chirac’s decision 27 years ago in 1997.

The French parliamentary election, consisting of 577 seats, is conducted through a two-round simple majority system. If a candidate receives more than 50% of the votes and support from at least 25% of all registered voters in the first round, they are elected outright. If not, a second round is held a week later between the top two candidates and any other candidate who received at least 12.5% of the registered voters’ support. Winning outright in the first round is rare, and the second round often involves three to four candidates, leading to frequent alliances and coalitions. This seemingly complex system was designed to make it difficult for candidates from political extremes to be elected. This election will take place in two rounds on June 30 and July 7.

The main reason President Macron decided to hold elections is that he currently leads a minority government. Over the past two years, Macron has used constitutional powers granted to the presidency to pass legislation despite parliamentary opposition, but he intends to end this situation through the upcoming election. Macron expects that all political forces, except the far-right, will unite to form a traditional republican front opposing far-right governance. Although the National Rally has steadily expanded its support by advocating anti-Islam, anti-refugee policies, strengthening public authority, and even EU withdrawal, there remains a strong rejection of the National Rally’s platform. Macron believes that if opposition forces unite, they can defeat the National Rally. He also hopes that this process will consolidate support around himself and Renaissance, turning the crisis into an opportunity.

French President Emmanuel Macron gestures while speaking to the media at the G7 summit held on the 14th (local time) at the Borgo Egnazia Resort in Italy. Photo by AFP and Yonhap News.

The problem is that the chances of victory are not high. According to polls, the National Rally is leading in 93% of all constituencies. It is projected that the National Rally, currently holding 88 seats, could increase its seats to about 250 in this election. For Macron’s gamble to succeed, all parties except the National Rally must unite to form an anti-National Rally front. However, the center-right Republicans hinted at possible cooperation with the National Rally, causing a stir, and on the 13th, four left-wing parties decided to pursue separate independent paths, greatly increasing the likelihood that Macron’s plan will fail. After the first round of voting, polling support rankings show National Rally at 34%, left-wing coalition at 22%, Renaissance at 19%, and Republicans at 9%. In this scenario, Renaissance could be reduced to a minor party.

If the National Rally wins the election, it will be handed power over domestic affairs, including the prime ministership. However, Macron believes the National Rally lacks the ability to fulfill its promises through policy rather than slogans. Therefore, he aims to demonstrate their incompetence during this period and hopes that the forces he supports will win the 2027 presidential election. The problem is that France could experience severe conflict and division over the next three years, causing great turmoil, which the financial markets are concerned about.

President Macron was elected in 2017 advocating a pragmatic centrist approach free from ideological constraints. Since taking office, he has recorded solid GDP growth by promoting labor market flexibility, significant corporate tax cuts, and startup support, and has shown economic achievements by pursuing reindustrialization in advanced manufacturing sectors such as electric vehicles. However, the lives of ordinary citizens remain difficult, and he has failed to alleviate public dissatisfaction and fear caused by the rise of refugees and Islamic forces. To curb the expansion of the National Rally, he needed to demonstrate flexibility by encompassing various forces, but his elitist and autocratic approach resulted in subtractive politics rather than additive, leading to a shrinking support base. In contrast, the National Rally has continuously provoked public dissatisfaction while showing flexibility in actual policies, gradually expanding its support base. By governing regions won in local elections without major problems, it has eased vague fears about the far-right and reached a stage where it demonstrates influence as a real political force.

Macron’s political gamble will have a significant impact beyond France, affecting the entire European continent. If he wins, it will show that strong rejection of the far-right remains, weakening their momentum. However, if he loses, it will accelerate the strengthening of far-right trends across Europe and favor Donald Trump in the upcoming U.S. presidential election in November.

Choi Jun-young, Legal Expert at Yulchon LLC (Global Law & Policy)