President Marine Le Pen has a low chance but could pose a huge risk. The extreme-right candidate calls for a referendum on “Frexit,” a French exit of the euro. The probability is very low, but the risk is enormous, as there is no euro without France, the core of the core.
Yet here is a scenario in which she could enter the Élysée Palace and start a snowball that would turn into an avalanche that would tumble down the single currency. Ahead of the first television debate, here is the two-step scenario.
President Macron – the mainstream scenario
According to the latest opinion polls, Emmanuel Macron will become the next President of the French Republic. The young former-socialist is set for a second place in the first round, advancing to the second round against extremist Marine Le Pen, where he will easily defeat her by a margin 60% against 40% or even higher.
Such a gap that is totally incomparable to the tight polls that preceded Brexit and the US elections. Comparisons to the 2016 political shocks are therefore quite irrelevant in case Macron faces Le Pen. In addition, French opinion polls have a solid track record.
Step 1 – Fillon sneaks into the second round
The Elabe poll puts Macron ahead of Le Pen with 25.5% against 25%, basically neck to neck, leaving Fillon well behind. Macron then goes ahead to crush Le Pen by 63% to 37%.
But another poll by OpinionWay puts Le Pen at 27%, Macron at 23% and Fillon at 18%. A 5% gap is beyond the margin of error but Fillon could still recover and make it to the second round?
Fillon, the center-right candidate, is embroiled in a scandal after paying his family salaries as parliamentarian staffers without them doing any work. This even turned into a formal investigation but he refused to quit. A potential replacement, Alain Juppe, announced he would not run, and the date is over. So, Fillon is seen by many as a lame duck, one that has reached the end of his career.
Not so fast.
Fillon currently lacks wide support, but his supporters are certainly determined. In addition, he leads the Les Republicans party, a mainstream party that has led the country for decades. Branding matters.
Maron, his rival for the second place in the first round has never faced a contest. He was appointed by the outgoing president Françios Hollande and then split from the Socialists to run on his own.
He is seen as young and charismatic, enjoying support from the right and the left. Nevertheless, his supporters are not that certain they will vote for him, and this is a stark difference from Fillon’s base.
Another factor to consider in this low-probability / high-risk scenario is a tragedy such as a terror attack. The string of disasters from Charlie Hebdo, the Bataclan, the bombings in Brussels and the truck assassin in Nice have all fueled support for Le Pen. Attacks at the Louvre and at the Orly airport have luckily not ended in massive tragedies but are very recent and feed into the campaign.
Apart from aiding Le Pen, such tragic events hurt Macron’s support: he is younger, less experienced and as aforementioned, enjoys a less-loyal base.
So, until April 23rd, Fillon could fill the gap and get into second place.
Step 2 – Le Pen beats Fillon thanks to the disgust
If Fillon overcomes his scandal and faces Le Pen, it becomes an open contest. French voters will have the option of voting for the extreme right or the corrupt mainstream right.
Mainstream left-wing voters could feel disgusted and stay at home. Extreme left voters might err to the side of the anti-establishment Le Pen against the mainstream that failed them.
A 10% gap now seems very real, but between now and the second round on May 7th, this gap could be closed.
So, President Le Pen could not be ruled out if Fillon makes it to the second round and Le Pen wins.
EUR/USD parity and below
If Le Pen rises to power, it does not guarantee that Frexit will win the referendum or that she will indeed push to hold it. However, the value of the euro would collapse on the speculation.
So far, the world’s most popular currency pair missed the opportunity to reach parity. A mix of disappointment from Trump, the Fed’s dovish hike, some ECB hawkishness and the Dutch elections have all provided support for euro/dollar.
But a threat to the existence of the single currency is a totally different matter.
Alternative scenario – Le Pen meets Hamon – EUR/USD makes an early crash
The focus is on Le Pen, Macron, and Fillon, but there are many other candidates, including two left-wingers who also appear in the television debates.
Benoit Hamon was elected leader of the socialists: he belongs to the left-wing of the center-left Socialists and he surprised by beating former PM Manuel Valls, a mainstream candidate more similar to Macron. Given his left-of-mainstream stance, he has less support, despite the branding. However, Hamon could still draw votes and he currently receives 13% support according to the polls.
Closely behind, Jean-Luc Melenchon of the official radical left receives 12% support. Talks on running together ended with a clash and they bashed each other. The usual splits in the left have resulted in moving the focus elsewhere.
Also here, Melenchon could quit, leaving the stage to Hamon. In this scenario, disenfranchised voters from the left could put Hamon in second place against Marine Le Pen.
A “generic” candidate of the Socialists against Le Pen would have probably had the same chances like Macron: an easy ride to the presidency. But Hamon is no normal candidate, with his calls for a 32-hour work week and a tax on robots.
In this scenario, the euro would already collapse on April 23rd, still caring about the second round on May 7th, but uncertain who to root for.
What do you think?
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