France’s presidential candidates met in a pre-election debate today ahead of the French elections this month. These elections are significant as they have the potential to threaten the existence of the EU owing to the growing popularity of Le Pen, a proponent of Frexit.
The elections will be held in two rounds – first round takes place on April 23, and if no contestant wins more than 50%, it moves to the second round, scheduled May 7. As per polls, Macron (En Marche!) and Le Pen (Front National) are the top contenders for the second round of elections, though there is a high possibility that Filion, the republican candidate who is currently facing corruption allegations, could also be a possible candidate for the second round.
Impact on euro stock markets and currency
A Le Pen victory would most likely cause France to exit from the European Union. Frexit could eventually lead to the dissolution of the European Union. Her victory thus involves a high degree of political uncertainty. Despite its low probability, if it happens, her victory could trigger fears about the EU breakup and lead to massive capital outflows leading to a crash in euro zone stocks and Euro currency.
Whereas a Macron / Fillon victory would raise hopes of trade friendly structural reforms and reduce political uncertainty around EU integration, thereby lifting market sentiments.It would most likely trigger a relief rally sending Euro stocks and currency higher.
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