Source: AFP
The euro fell on Monday after a far-right surge in EU polls over the weekend triggered a general election in France, although analysts believe the single currency will remain resilient.
The euro zone’s common unit was down 0.3 percent at $1.0736 around 1415 GMT, while Paris’ CAC 40 share index fell 1.9 percent on a shock after President Emmanuel Macron called an election.
Investors are concerned about the region’s political “shift to the Far Right” as well as the “surprise factor” of France’s snap general election, according to XTB analyst Kathleen Brooks.
Macron announced on Sunday that he was dissolving the National Assembly, or the lower house of the French parliament, after news that far-right parties including the National Rally (NR) had taken nearly 40 percent of the French vote.
NR is led by 28-year-old leader Jordan Bardella, who is mentored by Marine Le Pen — runner-up in the last two presidential elections.
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France will vote for a new National Assembly on June 30 with a runoff scheduled for July 7, two years after Macron failed to win an outright majority.
Economic uncertainty
The euro was hit as investors worried that political turmoil could damage Macron’s agenda in France, which was a key founding member of the eurozone.
“The prospect of a parliament controlled by Le Pen and Bardela with Macron as president could derail Macron’s plans for much-needed economic reforms in France that could have eased worries about… debt.” , Brooks told AFP.
These concerns were brought into focus when Standard and Poor’s recently downgraded France’s long-term sovereign debt rating.
Added to the mix, the July election could bring a far-right prime minister.
“The possibility (is) that the parliamentary elections in France will result in a prime minister from another party,” said Rabobank analyst Jane Foley.
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![](https://images.yen.com.gh/images/2067c1df10ae3d26.jpg?impolicy=cropped-image&imwidth=256)
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“This would change the direction of French politics, including the agenda in relation to fiscal policy and potentially on issues such as EU enlargement.”
Euroscepticism
The growing popularity of far-right parties has also raised concerns about growing Euroscepticism on the continent.
Going forward, commentators warn, it could further strain the euro, which was created in 1999 as a key instrument for bringing the continent closer together.
“The euro was created as a product of the process of European integration. And it is simply unthinkable without European integration,” said Commerzbank analyst Ulrich Leuchtmann.
“It should be obvious that this does not make the euro any more attractive than national currencies such as the US dollar and the pound sterling.”
Kit Juckes, an analyst at Societe Generale, said he did not believe the European single currency would fall back below parity “if Macron’s bet fails to pay off”.
“I can imagine … the euro going down, but I suspect it would be reasonably short-lived,” he predicted.
Source: AFP