The French Presidential Election Is Underway

Update: according to Belgian Le Soir, first exit polls show that Hollande is not surprisingly ahead, with 27% of the vote, 25.5% for Sarkozy, 16% for Marine Le Pen, and 13% for Jean-Luc Melenchon. More or less just as expected, and setting the stage for the runoff round which will be Hollande's to lose. French speakers demanding a minute by minute liveblog, can find a great one over at Le Figaro, and an English-one can be found at

And from Reuters:

Note to media: this story should not be published in France or in French before 8 p.m Paris time (1800 GMT), in compliance with French law.


Socialist challenger Francois Hollande and incumbent Nicolas Sarkozy are set to contest a French presidential run-off in two weeks, with the former topping the first-round vote on Sunday, Belgian broadcaster RTBF said.


RTBF quoted first projections based on counted votes from hundreds of polling stations, which by law cannot be published in France until the last polling stations close at 8 p.m. (1800 GMT), as showing Sarkozy and Hollande would go through to the second round on May 6.


Hollande was ahead on the first ballot with 27 percent of the vote, with Sarkozy on 25 percent. RTBF said extreme-right leader Marine Le Pen came in third with 20 percent.

As of 8 am CET, polls are open in the first round of the French presidential elections where voters are expected to trim the playing field of ten to just two candidates, incumbent Nicholas Sarkozy and his socialist challenger Francois Hollande, who will then face off in a May 6 runoff, where as of now Hollande is expected to have a comfortable lead and take over the presidency as the disgruntled French take their revenge for an economy that is contracting, an unemployment rate that keeps rising (see enclosed) despite promises to the contrary, and as their to "express a distaste for a president who has come to be seen as flashy following his highly publicized marriage to supermodel Carla Bruni early in his term, occasional rude outbursts in public and his chumminess with rich executives.....France is struggling with feeble economic growth, a gaping trade deficit, 10 percent unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut the country's triple-A credit rating in January." In a major shift for the country, Hollande would become France's first left-wing president since Francois Mitterand, who beat incumbent Valery Giscard-d'Estaing in 1981. As Reuters reports, "Hollande, 57, promises less drastic spending cuts than Sarkozy and wants higher taxes on the wealthy to fund state-aided job creation, in particular a 75 percent upper tax rate on income above 1 million euros ($1.32 million)." The Buffett Rule may have failed in the US but La Loi de Buffett is alive and well in soon to be uber-socialist France. Yet it is not so much Hollande's domestic policies, as his international ones, especially vis-a-vis the European Fiscal Treaty, Germany, and most importantly the ECB, that roiled markets last week, causing French CDS to spike to the widest since January. In other news, goodbye Merkozy, hello Horkel as the power center shifts yet again to a new source of uncertainty and potential contagion.

From Reuters:

On Friday, the risk premium investors charge to hold French debt over safe-haven German bonds rose to nearly 1.50 percent, betraying fears that Hollande's economic program could be pulled to the left if Melenchon's popularity leads to a strong bloc of seats for the far left after parliamentary elections in June.

And the WSJ:

French Socialist presidential candidate François Hollande on Friday pressed the European Central Bank to cut interest rates and to lend directly to euro-zone member countries to bolster economic activity, in the latest escalation of campaign rhetoric targeting the institution.


On the final day of the election campaign before Sunday's first-round vote, Mr. Hollande detailed how the ECB could play a bigger role in boosting growth. Under French law there is no electioneering the day before the vote.


"If we think cutting interest rates is the way economic growth can be sustained, I'm in favor," Mr. Hollande said in a radio interview. "There's a second way: lending money to the states instead of lending it to banks."


The ECB declined to comment, but Mr. Hollande's comments are unlikely to gain traction within the Frankfurt-based institution.


Lending directly to states would mean the central bank is financing governments, which is strictly prohibited by current European Union regulations. ECB Executive Board member Peter Praet, who is also the chief economist of the central bank, stressed in a speech in Berlin on Thursday that EU legislation clearly rules out the ECB's monetization or bailout of governments.


In addition to going against the ECB's prime mandate of maintaining price stability, any ECB direct lending to states also would put the bank's independence into question, ECB executives have repeatedly warned.

Needless to say, the ECB already seen as a puppet of various core European political interests, will have none of this and made it very clear that no lending to governments directly will take place (for the simple reason that the weakest link in the European ponzi is to keep banks funded under the pretext of them performing patriotic duties such as funding their own governments indirectly, which in turn merely becomes yet another sovereign contingent liability, as explained here before extensively - as such banks can not be disintermediated from the ECB's funding chain!). This in turn explains why not only Europe's tenuous monetary agreement may be about to fray, but also the Fiscal Union (which Ireland is set to vote against in a public referendum) may soon follow suit.

Yet is a Hollande victory guaranteed in the runoff? DB's Gilles Moec explains what the key variables will be if Sarkozy wants to not hand over power to his socialist competitor (short of giving Diebold the vote counting contract of course):

How could Sarkozy fill the gap in two weeks? We think that three elements could help the incumbent between the two rounds. However, we continue to think that the dynamics in favour of Hollande are unlikely to be reverted.


First, the TV duel between the two rounds is a central ritual in French politics. Unlike in the US or the UK, the candidates face each other with minimal intervention from the moderator and it is normally a dramatic moment where personal elements, rather than substance, dominate. Sarkozy has more experience than Hollande in this type of configuration. However, given the magnitude of Hollande’s advance in voting intentions, it would take a “victory by knock-out”, with a major blunder from the socialist candidate to really boost Sarkozy’s chances.


Second, how the centrist candidate Bayrou positions himself in the second round could play a role. The polls currently put him at around 10%. In 2007, when he secured in the first round a record 18.7% of the votes for a “third way” candidate, he refused to endorse any of the two contenders. He campaigned this time less on the left and has been openly critical of Hollande’s economic program. Some of Sarkozy’s aides publicly mentioned the possibility that he could be made Prime Minister if their candidate is re-elected. Still, we would find it surprising that he would publicly endorse Sarkozy, since it would deeply divide his followers. His electorate is very composite, often liberal in the Anglo-saxon definition of the terms on social issues while fiscally conservative and probably more open than the socialists to structural reforms. Some of his supporters have already publicly endorsed Hollande. In any case, we do not think that he commands real control over his electorate.


Third, an explicit electoral pact between Melanchon and Hollande could push the moderate electorate towards Sarkozy. However, we do not think that Hollande would make this tactical mistake. He has repeated several times in the campaign that he would not negotiate between the two rounds, and that if non-socialists were to join him in a presidential majority ( and possibly secure cabinet positions), it would be on the basis of his own program. There again the 1981 campaign is being replicated. Then, the communist party’s maximalism – and Mitterrand’s refusal to clarify the relationship between the two rounds – allowed the socialist party to appear moderate by contrast, even if its own platform at the time was very far left. We think that Hollande’s calculation is that Melanchon’s electorate will massively vote for him in the second round in any case, out of rejection for the incumbent.

Although realistically, for any of this to happen in the next two weeks, seems like a stretch. Ironically it will not be the outcome of the direct runoff that will likely shape monetary and fiscal policy, but whether the socialist party ends up needing the support of the far left after the renewal of the lower hour of parliament. As a reminder:

Hollande is a whisker ahead for the first round, with an average 28 percent support in polls to Sarkozy's 27 percent. Both are far ahead of far-right leader Marine Le Pen, in third place at 16 percent, who wants to curb immigration and take France out of the euro zone.


Melenchon, whose crowd-pulling charisma and clench-fisted vow to end the power of markets over national economies have made him a star of the election race, ranks fourth with 14 percent, while centrist Francois Bayrou is fifth at 10 percent.


"We have to get rid of Sarkozy," said Marc Boitel, a trombone player taking part in a street protest ahead of Sunday's vote. "People just want jobs."


Boitel plans to vote for tub-thumbing radical leftist Jean-Luc Melenchon, who wants an anti-capitalist revolution, and then Hollande in round two, reflecting a voter shift that is unsettling some financial analysts as feeble growth threatens deficit targets in Europe's No. 2 economy.

And from DB:

Could Hollande be pushed towards a more radical stance on European issues by his political allies? The left already controls the upper house of parliament. The lower house will be entirely renewed just after the presidential elections (votes completing on 7 June). A risk is that the socialist party alone fails to secure an absolute majority and depends on the support of the radical left, which could push to try to transform what we hold for pure campaign rhetoric (for instance changing the ECB’s mandate) in actual legislation. Furthermore, to ratify any “completed” fiscal compact Hollande would need to explicitly incorporate the European fiscal rules in the French legal framework. Initially, the draft European treaty called for a mandatory inscription in the Constitution, which would be very sensitive in France since Sarkozy failed to secure such a constitutional reform last year, on the fiscal golden rule, because of the socialist party’s opposition. This has been watered down – initially to help, in  vain, the Irish to avoid a referendum – so that the legal change can be done at the constitutional level “or equivalent”. We think that Hollande would use an “organic law” to incorporate the changes, drawing on his campaign pledge to inscribe his objective to eliminate the deficit by 2017 in an organic law (which in practice sets the procedure for the discussion of every annual budget bill).

In a Europe rapidly disenchanted with the failure of the NWO ushered globalization paradigm, all of the above has a high probability of happening, and with a scorching political summer ahead, with elections in Greece, Germany, and now the Netherlands following yesterday's surprising Wilders budget opposition fiasco, not to mention the Ireland referendum, the market is finally starting to pay attention.

In terms of what will be impacted the most in the aftermath of a probable Hollande victory, we refresh readers on the Sarkozy "victory matrix:"

Finally, for one of the best summaries to date, we urge a reread of George Magnus' of UBS great summary from back in February: "Enter Francois Hollande, Stage Left" because then even the chimera of austerity will now be gone, providing the ECB little if any political cover for its monetization. The irony is that the market will now be far more focused on the French election than any meaningless firewall promises out of the IMF becase as Magnus said:

"Hollande wins, the difficult progress towards European fiscal integration, including the building of firewalls, could become mired in new arguments, or stall. This would have important consequences for Europe, and not least for the newly pro-active ECB, which would have reason to doubt that politicians were fulfilling their pledge to create permanent fiscal discipline."

Although speaking of the IMF, in a parallel universe it would be DSK that would be the frontrunning right about now. Just think of the presidential parties that would have ensued in that universe.

Below is a summary of all the candidates' policies courtesy of Al Jazeera: