The French regional election’s results brought more concerns to an already complicated national geopolitical situation. The Extreme Right party, “le Front National” leads in seven regions out of thirteen and it has become the first party in France gathering 30% of votes.

From left to right, traditional parties treated this issue as the consequences of the last dramatic events in France and as a protest vote due to a difficult economic situation. 

Indeed, likely the Paris’s bombs exacerbated the phenomena, but they did not create the trend seen already in the last local elections and in the polls before the bombings. The illness is deeper and it is not going to vanish by itself. 

First of all, the problem is economic. At the opposite of Germany, France did not change the structure of its economy. Under Chancellor Schroeder, Germany modernised its labour market, – cuts in the social welfare system (national health insurance, unemployment payments, pensions), lowered taxes, and reformed regulations on employment and payment -, and built the foundations to face 21st Century challenges. France did not do the job. Worse, each new government before being elected, promised to make reforms, but they never did. Traditional parties lost all credibilities in front of a population lost in translation, losing consumption power and social identity. France has an unemployment rate of 10.6% (vs 6,5% in Germany), a government debt to GDP close to 100% and still running a deficit of 4%. One-quarter of the young population is unemployed and one-third of the young people who has a job, it is a job financing by the state call “emploi jeune”, unsustainable measure for the State. Not surprisingly, the first party of young people has become the “Front National”. 

The difficult economic situation had an impact on the link between communities. The most important Muslim and Jews communities in Europe are living in France and the deterioration of the economic conditions have seen an increase of aggressions against the two communities. Despite the fact that France is not anymore an attractive country for economics or political migrants as figures show, xenophobia is increasing. On the 22,000 visas promised to Syrians migrants by the French government, only more than 500 were delivered prior the Paris’s bombing.

Secondly, the French Extreme right leader, Marine Le pen has made a good job. She completely refurbished the “Front National” boutique. She put new faces more acceptable for public opinion, modernise the structure of the party and found the right way to put arguments together. Do not be wrong, only the face of the boutique has changed. Racist, fundamental catholic and xenophobic figures are still there, hidden in the back office boutique. The products have been refurbished too, but it is the same recipe: populist, anti-European message, security drift and a program which is a mix between left and right. It is just sexier: young people, a lot of women and even a candidate known as gay. Well, she did an absolutely brilliant exercise of communication. 

The current economic conditions and the cleverness of the Extreme right candidate make the threat very serious for France, which is the second economy in the Euro area. For memory, the first economic measure prescribed by Marine Le Pen is to leave the Euro area. With about 45% of the total debt in the hand of non-residents and a debt at 95% of the GDP, everybody can understand the risk of such measure which simply is a bankruptcy which could have a deeper impact that the bankruptcy of Lehman Brothers.

Is it Fiction? Unfortunately, it is not. The lack of leadership and charisma among traditional parties combined with a wrong analysis of the phenomena could bring Marine Le Pen at the French Presidency in just seventeen months. Is such scenario  priced in your investment strategy? Well, think about it very seriously…