A collective sigh of relief was being felt by global markets in the aftermath of the first round of the French presidential election. As widely expected, centrist Emmanuel Macron and far-right National Front leader Marine Le Pen qualified for the second round of the elections, which had been described as historic and highly unpredictable.
The euro rallied across the board, equity markets jumped and French-German bond spread narrowed. Voila, this was the anti-climax that risk-averse investors had been hoping for. According to the latest IPSOS polls, Emmanuel Macron is seen beating Marine Le Pen in the second round on May 7 with two-thirds of the votes.
But before we keep the champagne (presumably a French bottle) flowing, here is a gentle nudge as to what could go wrong and why it may not all be smooth sailing in what are very choppy waters for Macron if he is elected into the Elysee on May 7.
First of all, Macron is not yet backed by any political party and may find it difficult to govern.
As Barclays stated in a report on Monday, they believe "the Parliamentary elections in June will carry more weight than usual, possibly even more than the Presidential election, but the outcome remains uncertain. In light of the statements from senior political figures – particularly from the Republicans, which is the only party in the top four to have a strong local base – parties appear to be intent on pursuing their own parliamentary campaigns, which might suggest that whoever wins the second round run-off will face a substantial opposition, even if that is
Secondly, his plan for reforms seems ambitious – a little too ambitious maybe given the lack of support he might face in parliament.