For years, France enjoyed watching its old rival, the UK, grapple with political and economic turmoil. Now, the tables have turned.
Why it matters: Both French President Emmanuel Macron and UK Prime Minister Rishi Sunak have called for surprise early elections in the coming weeks. While the UK’s outcome seems predictable, France faces a potential storm of discord.
Driving the news: France’s bond spreads have widened significantly, surpassing Portugal’s, and its stock market has taken a hit. As a result, London has reclaimed its title as the highest market capitalization in Europe.
Analysts foresee a potential far-right majority in the French parliament, which could lead to increased fiscal spending, reduced support for Ukraine, and a break from pan-European economic policies.
On the flip side: The City of London is experiencing a renaissance. The Financial Times’ Patrick Jenkins reports that London’s financial district, the Square Mile, is set to build 16 million square feet of business office space over the next 15 years to meet demand.
“Banking has largely withstood the challenges of Brexit and the 2008 financial crisis a decade earlier.” “Private equity has boomed. And insurance, the particular specialism of the area, remains world-leading after a record year.”
The bottom line: Back in the 1980s, the UK’s right-wing government deregulated its financial sector, while France’s Socialist party nationalized its banks, giving Britain a lasting edge.
Ironically, markets now favor the prospect of a left-wing victory in the UK over the fear of a right-wing parliament in France.
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