[Bloomberg Column] Gambler Macron Becomes the 'Kingmaker'

French President Emmanuel Macron, known as a 'habitual gambler' who took a surprise gamble with an early general election, will be able to remain on the political stage.

In the runoff of the French general election held on the 7th (local time), voters firmly said 'no (non)' to the far-right party National Rally (RN) led by far-right politician Marine Le Pen, while hesitating at a 'maybe' level toward the competing left and centrist parties.

President Macron is trying to follow the path taken by UK Prime Minister Keir Starmer (leader of the Labour Party), who won the UK general election, by bringing the Green Party and the Socialist Party within the left-wing alliance New Popular Front (NFP) to his side, but this will not be easy. The greater risk is that political division will continue in France, the Eurozone's second-largest economy.

[Bloomberg Column] Gambler Macron Becomes the 'Kingmaker'

French President Emmanuel Macron [Photo by Reuters]

This early general election itself was like a Netflix drama. And the results are equally intriguing. President Macron might show his characteristic satisfied glance seeing his rival Le Pen trailing in the number of seats. The tactical alliance formed before the second round of the general election between Macron's centrist ensemble and the left-wing alliance NFP clearly strengthened the so-called 'Republican Front,' an anti-far-right coalition. Additionally, Le Pen's ambiguous policies and the inexperience of some RN candidates contributed to preventing the far-right party led by Le Pen from gaining more votes.

Looking at the leaderboard showing the current rankings in the game, the situation is much less clear. Macron's centrist bloc secured the second-largest number of seats after the NFP in this election but falls far short of the 289 seats needed for a parliamentary majority. Although tactical voting, where the third-place candidate withdrew to reduce seat losses against far-right RN candidates, partially mitigated the damage, Macron remains unpopular. Even people within Macron's camp feel betrayed by his decision for an early election, leaving him with little political capital to push further reforms.

Nevertheless, President Macron has ensured that his political camp remains in the game as a potential coalition partner. The left-wing alliance under the influence of Jean-Luc M?lenchon, the leading far-left politician and fiery agitator of La France Insoumise (LFI), is expected to secure fewer than a parliamentary majority even in the best-case scenario. (The left-wing alliance NFP, which came first in this election, consists of four parties: LFI led by M?lenchon, the Communist Party, the Green Party, and the Socialist Party.)

In other words, President Macron has now stepped down from being the King to becoming the Kingmaker. And as he takes the first step toward forming a coalition government, he is more likely to look toward the left-wing camp than the right-wing camp.

The financial markets are currently relieved that no party has secured a parliamentary majority, making unrealistic and costly policies difficult to implement, but this thinking may need to change. What initially looked like a Giorgia Meloni scenario for the French far-right (Meloni is the far-right Italian Prime Minister) could now become a Keir Starmer scenario for the French far-left (Starmer is the UK Prime Minister who won this month's general election and changed the government).

Just as the possibility of the UK Labour Party winning the election increased after the removal of the distinctly left-wing Jeremy Corbyn as leader, the path to power for the NFP may also involve breaking away from far-left politician M?lenchon and forming a more centrist coalition. Combining the seats of Macron's centrist camp with those of the Green Party and Socialist Party within the left-wing alliance would bring them quite close to the parliamentary majority of 289 seats.

As centrist-left politician Rapha?l Glucksmann said, we can build a parliamentary arc that is neither Jupiter (Macron's nickname) nor Robespierre (the Reign of Terror figure from the French Revolution), meaning neither President Macron nor M?lenchon.

However, all this carries risks. Even if Starmerism?the approach of shifting the Labour Party from radical left to center-left, which led to Keir Starmer's victory in the UK general election?is successfully emulated, it will not become the majority party in parliament like the Labour Party.

It will take considerable time to complete the formation of any coalition. France will become vulnerable due to unprecedented political division in the history of the Fifth Republic. France's fiscal deficit is soaring, and its economy is growing more slowly than the Eurozone average. This suggests that difficult decisions such as tax increases are inevitable. It also means there is little capacity to address deep-rooted problems like productivity, innovation, and population decline. Christopher Dembik, strategist at Pictet Asset Management, predicts that regardless of which coalition takes office, the effects of Macron-style reforms?from pension reform to welfare?will inevitably be partially diluted.

For now, there is relief that France, the Eurozone's second-largest economy, has avoided an era of far-right populism. But the problem is that it remains highly vulnerable to what lies ahead. Only three years remain until the presidential election. Le Pen, who is aiming for the presidency, is enjoying continued opportunities to attack President Macron from the opposition's judgment platform. France is still far from returning to a 'normal' state.