French political tensions return to the fore as the ‘Olympic truce’ ends

Time is running out on the so-called “Olympic political truce” announced by French President Emmanuel Macron in late July, pushing the country’s fraught political landscape into sharp focus.

Legislative elections called by Macron in early July – before Paris hosted the world’s biggest sporting event – resulted in a hung parliament, with no party or alliance gaining a majority. The left-wing New Popular Front alliance won the most seats and prevented a much-discussed victory for the right-wing National Rally.

However, in recent weeks, the nation has been united in the spirit of sports.

The usual stream of squabbling from politicians across the spectrum has dried up, and the “caretaker” government remains nominal. The next nine-month session of the National Assembly will not begin until October 1.

Macron is set to remain president until his term ends in 2027, although much of his domestic political capital has been drained following the party’s Renaissance party election.

One of the main questions on the agenda today is who Macron will appoint as the new prime minister – who heads the French government, nominates ministers and makes laws – after the resignation of his ally Gabriel Attal.

Macron is keeping his cards close to his chest, and has yet to comment on Lucie Castets, an unknown candidate nominated for the role by the New Popular Front after much debate.

While theoretically free to choose anyone for the role, and under no obligation to choose a candidate from the party with the most seats, an unpopular choice can be removed by a vote of no confidence in parliament. Macron cannot dissolve the National Assembly and call another election for another year.

Elsa Clara Massoc, assistant professor of International Political Economy at the University of St. Gallen, said this situation is “unprecedented” and is seen as a potential “dead-end” because of the extent of the division in the new parliament.

“In the previous legislature, Macron did not have an absolute majority but he is still more than the Left now and can count on the support of the Conservatives to avoid censorship,” he told CNBC by email.

He highlights the issue including that fact The New Popular Front’s 178 seats are less than the 289 required for a majority and Castets candidates are likely to be rejected by other parties.

Meanwhile, Macron’s own political and government allies have been “largely rejected by France,” Massoc added, and no party will form an alliance with the far-right National Rally. Even within the left group, the party is divided and some would reject any alliance with the centrists, he said.

One result could see the right-wing Les Republicains willing to form a “passive majority” with the center, but the former seems reluctant to lose “what remains specific,” added Massoc, and the opposition in parliament will still be high.

There are other questions about how such a divided parliament will agree on any legislation, with the approval of the 2025 budget. Even in 2022, Macron will use special constitutional powers to pass next year’s spending bill.

There is also fierce debate over how – or what – to act to tackle France’s debt pile, and whether flagship Macronist policies such as raising the national pension age can or should be scrapped.

In the French political system, parliament has little power and between 2017 and 2022, 65% of the texts adopted will be laws proposed by the government rather than parliament, Massoc said.

From a market perspective, France CAC 40 The index has fallen over 4.5% since the election results 7. But analysts say that the parliament is actually divided can lead to more stability in stocks and bonds as it will likely prevent the implementation of some other party’s populist policies.

Political parties have strong sights on the 2027 presidential race – which Macron cannot do – and few want to be responsible for reducing public spending to deal with the public deficit, Renaud Foucart, a senior lecturer in economics at Lancaster University, told CNBC by phone.

For now, uncertainty reigns and Macron’s strategy seems likely to drag things out for a long time, he said.

From a personal perspective, although he is a “lame duck” leader at the front, Macron would like to take a more international focus and continue to try to influence European politics, Foucart said.

“The project that includes reforming the labor market and deregulating the economy has been completed – they are doing what they want,” he said.

Mujtaba Rahman, managing director of Europe at Eurasia Group, said in a note on Monday that Macron had failed and succeeded but did not get credit for his domestic victories, including reducing high unemployment.

The left-wing focused on tax cuts for the rich and “an attack on the French welfare state,” while the right-wing pointed to high immigration numbers and violent crime rates, he said.

Macron also ultimately “failed to sell his vision of a stronger France in a stronger Europe to the majority of French voters,” Rahman said.

“Seven years ago, Macron promised to lead France to the promised land beyond the sterile alternation of left and right. $3.28 billion) in accumulated debt,” said Rahman.

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