What Hollande’s exit means for the political landscape in France

French President Francois Hollande waits for a guest on the steps of the Elysee Palace after a meeting in Paris, September 9, 2014.
Christian Hartmann | Reuters

Francois Hollande's surprise announcement that he would not run for a second term as President of France has increased political uncertainty in the euro zone's second largest economy.

The decision came as political parties are gearing up for a decisive election – where populism, terrorism and economic issues are set to be the main talking points.

"The announcement by President Francois Hollande on 1 December that he will not run for re-election in 2017 will have a limited impact on the left's chances of retaining power," said Antonio Barroso, deputy director of research at Teneo Intelligence in a note.

Hollande's withdrawal means the socialist party has a vacancy to fill. At the moment there are seven candidates fighting for that position and Prime Minister Manuel Valls may be preparing a bid. Polls suggest that Valls and former Economy Minister Arnaud Montebourg are the most likely candidates to represent the Socialists in the presidential election.

"The vote is going to be horribly spilt within the socialist party when we come to the primaries," David Marsh, managing director of OMFIF, told CNBC on Friday.

However, analysts believe that it doesn't really matter who will represent Hollande's party. The center-left candidate will have to deal with Hollande's legacy – a failure to bring down unemployment and revive the country's economy – a divided party and an electorate concerned with security after several terrorist attacks.

"Regardless of which center-left candidate is nominated, the fragmentation of the center-left electoral offer means that former Prime Minister Francois Fillon is still the frontrunner to win next year's presidential election," Barroso from Teneo added.

France's center-right Les Republicains elected last Sunday Fillon as its representative. The former prime minister wants to increase the retirement age, decrease social security benefits and put an end to the 35-hour working week.

France's far-right party is also a big player in this election. The party led by Marine Le Pen has seen a surge in support from voters in regional elections on its anti-euro and anti-European rhetorics. Opinion polls indicate that Le Pen will win the first round of the election and make history by taking her party into the final round of voting for the Presidency.

"The French do not like Thatcherism, full stop. So Fillon is going down in history as being a man who goes into this election with a big block of concrete around one of his legs because they don't want that, they want more status, they want the French state to look after them," Marsh told CNBC.

Ultimately, however, Hollande's withdrawal from the race means that French politics are clearly at a turning point.

"This is the first time in the 5th republic that you have an incumbent stepping down before or saying he's not going into the second round. This actually shows that how the French 5th republic has lost its initial magic. The whole point was to put an incumbent, a strong General de Gaulle into power, who would then command things, rule things," Marsh said, adding that "French politics have hugely changed over the last 50 years."

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