If the U.S. economy isn’t bleeding—at least not a lot, yet—then what is? I closed yesterday’s post with the idea that Europe is the area we should be watching, and the place to start is in France.
Anti-Europe candidates, left and right
The first round of the French presidential election takes place this Sunday. Until quite recently, the general consensus was that the National Front candidate, Marine Le Pen, would do well enough to get into the second round but then be trounced by a more mainstream candidate. Therefore, the thinking went, there was no real reason to worry about the Front's anti-European policies. This was a very reasonable take, in keeping with past French elections and certainly in line with what the polls were saying.
Over the past couple of weeks, however, an anti-European candidate on the left has emerged. Jean-Luc Mélenchon is doing quite well, and there’s now a real chance that two anti-Europe candidates could move on to the second round. We’re within a couple of days of seeing whether one of the fundamental members of the European Union, not to mention the eurozone, is about to rock the political foundations of the largest collective economy on the planet.
Adding to the concern, polls have tended to understate the support for outsider candidates. We saw this in the U.S. election, we saw it with Brexit, and we’ve seen it before in France. With the polls as close as they are, it's highly possible that both Le Pen and Mélenchon will do better than expected. In that case, the French will face a choice between a far-right party and a far-left one—neither of which is pro-Europe in the way previous governments have been.
To frame it in U.S. terms, suppose we had a two-round election, and the final two candidates were Bernie Sanders and Ted Cruz. I’m not suggesting that either politician is comparable to the French candidates, but the example illustrates the breadth of the choice the French may have. No matter who wins, this would be a radical break with the past, not only in France but in Europe as a whole.
What does this mean for the U.S.?
In the short term, not much, but financial markets are likely to be rattled if these two candidates move on.
In the medium term, the situation is more serious. Either candidate could be expected to call for referenda on leaving the eurozone, or even the EU, which would destroy those institutions. Much as we’ve seen in the U.S., a victory by either would bring nationalism back to the center of political discourse. European nationalism, of course, has a bloody history, and the EU was specifically created to bind together France and Germany and make war less likely. A breakdown of that structure would be disheartening in many ways.
I’m not usually one to worry about elections, but in this case, there really may be a systemic shift pending. For all the news we see every day, few things would truly bring about meaningful changes in the world. The first round of the French presidential election could be one of them.