Europe dodges populist bullet in French vote

Economy News


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There was a quick and near-audible sigh of relief last night among European leaders as French exit polls came in, confirming Emmanuel Macron’s second term as president. The feeling of Europe dodging a seismic populist upheaval – even as Marine Le Pen scored more votes than last time around – was reinforced at smaller scale in Slovenia, where voters ousted populist, anti-EU prime minister Janez Jansa (who was seeking to emulate Hungary’s Viktor Orban).

But all is not well in Europe. The war in Ukraine is now in its third month and the rocket attacks on civilians have spread to the beautiful port city of Odesa. As the FT reported yesterday, Russian President Vladimir Putin has lost interest in diplomatic efforts to end his war with Ukraine and instead appears set on seizing as much Ukrainian territory as possible.

With the French election now in the bag, diplomats in Brussels expect some movement on the sixth sanctions package, which includes measures targeting Russian oil. (The same goes for other files that have been put on hold pending Macron’s re-election, notably free trade deals)

One key element for those upcoming sanctions to work will be enticing Russia-friendly countries, including India, if not to align, then at least not to scupper the restrictive regime. With European Commission President Ursula von der Leyen in New Delhi today, we’ll look at what goodies she plans to put on the table – trade, technology and weapons.

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Macron 2.0

To the thumping tune of Daft Punk’s “One More Time”, supporters of Emmanuel Macron cheered and danced under the Eiffel Tower in Paris when early results showing his clear victory hit, writes Sarah White in Paris.

Behind the party mood, even Macron enthusiasts had immediate concerns about what the next five years would bring and the tougher ride he likely has in store at home, after a strong showing for the far-right and with the prospect of a battle for parliamentary seats in the June elections.

Macron has become the first French president in 20 years to win a second term, defeating his far-right challenger Marine Le Pen by around 58 per cent to her 42 per cent, according to early projections.

That marked a more narrow margin than five years earlier in a first run-off between Macron and Le Pen, however, after a closely-run end of campaigning that brought to light strong pushback against the incumbent among leftwing voters too.

Disappointed voters from Le Pen’s camp but also far-left supporters are already pushing to mount a strong challenge to Macron in the upcoming parliamentary elections, raising questions about how easily he will be able to pass reforms, including a pensions overhaul that proved unpopular on the campaign trail.

For the European Union, the repeat victory of the fervently pro-EU Macron will prove a more immediate boost. Even as Le Pen dropped her call from five years ago for France to leave the bloc, the prospect of her victory had fueled concerns of a different stance on Russia thwarting the unity of the 27 members and France leaving NATO’s military command structure (again).

“Macron’s clear victory is likely to reassure the markets that the European dynamic will continue,” Frédéric Leroux, an investment committee member of asset managers Carmignac said in a note, pointing to likely short-term benefits for the euro.

Congratulations were quick to arrive, and not just from the regular allies such as commission chief Ursula von der Leyen, who within minutes from the exit polls being announced tweeted her “delight” at the prospect of continuing an “excellent collaboration” and Italy’s Mario Draghi welcoming the “splendid news for all of Europe”. UK Prime Minister Boris Johnson and Poland’s premierMateusz Morawiecki, who in the past have both sparred with Macron, also congratulated him.

Macron received his first call of the night from Olaf Scholz, the Elysée Palace said, with the German chancellor also voicing his support.

“Your constituents also send a strong commitment to Europe today,” Scholz said on Twitter.

The French president, who had framed the election as a pro or anti-EU referendum, only made cursory mention of the next steps for Europe to supporters in his victory speech last night. He referred briefly to his “ambitious” project for the bloc and focused instead on trying to send a conciliatory message to voters of all bands at home.

His music choice was on message, however: emulating his election night five years ago, Macron, surrounded by a group of youngsters, walked up to greet supporters to a drawn-out rendition of “Ode to Joy”, the European anthem.

Chart of the day: Mapping voters

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Read more here about how support for the French far-right has grown over the years and under Macron’s first term. Five years ago Macron beat Le Pen by 66 per cent to 34. In 2002, the center-right incumbent Jacques Chirac defeated Le Pen’s father Jean-Marie Le Pen by 82 per cent to 18 after the Front National leader unexpectedly reached the second round.

Wooing India

If the EU wants to convince India to distance itself more from Russia it will have to offer tangible incentives – among them in the military arena, writes Sam Fleming in Brussels.

Accordingly, the potential for greater provision of defense equipment is set to feature in conversations between Ursula von der Leyen, the commission president, and India’s prime minister Narendra Modi when they meet today.

Von der Leyen is on her first visit to New Delhi since becoming commission president in 2019, and the Ukraine war is set to hang heavily over proceedings.

While EU powers have been dismayed by Modi’s refusal to condemn Vladimir Putin’s invasion, they have not been particularly surprised. India has a longstanding relationship with Russia that dates back to the cold war, and anywhere from 60-85 per cent of its military equipment is estimated to be of either Russian or Soviet origin.

To woo India away from Putin, the EU will have to be able to offer alternatives in key areas – most prominently arms and fertilizers.

Options include streamlining defense procurement procedures, as well as facilitating industrial joint ventures between EU companies and India. None of this can be achieved overnight.

But the EU is calculating that India – which has been diversifying its military procurement for some years – will be increasingly open to western equipment given expectations that the US and EU export controls will degrade Russia’s military technology base.

The UK is also looking for ways of enhancing its defense relationship with India: its plans include accelerating the licensing process by which India procures weapons from Britain and offers more joint military exercises and officer exchanges. For its part, the US, India’s Quad partner, designated India a major defense partner in 2016.

The union hopes that the specter of the “no limits” partnership between Putin and China’s Xi Jinping will serve as an additional incentive for New Delhi to pivot more to the west.

The EU-India meetings will accordingly see the unveiling of a new trade and technology council, and confirmation of a round of negotiations in June aimed at a trade deal between the EU and US.

What to watch today

  1. European Commission President Ursula von der Leyen visits India

  2. The European parliament’s trade committee votes on new rules tightening the scrutiny on foreign companies that receive subsidies

. . . and later this week

  1. European Court of Justice rules on Airbnb case on Wednesday

  2. Conference on the Future of Europe holds its final session on Friday and Saturday

Notable, Quotable

  • Swedish reluctance: Finland may be granting for NATO membership ever since the war in Ukraine started, but its EU, non-NATO fellow Sweden is a much more reluctant follower. Led by a center-left government deeply divided on NATO, Stockholm initially hoped it could avoid the question of membership and has in recent weeks changed thanks because of Helsinki saying it was likely to join no matter what its neighbor did.

  • Suisse inquiry: Norway’s $ 1.3tn oil fund, the world’s largest, has backed calls for a special audit at Credit Suisse and warned it would not absolve executives and board members from blame over multiple scandals as pressure grows on the Swiss lender to revamp its senior management.

  • Turkish flight ban: Turkey has banned Russia’s armed forces from using its airspace to reach Syria in a bid to increase pressure on Vladimir Putin as Ankara tries to revive peace talks with Ukraine.

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