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French election draws attention, new government may shift economic direction

TraderKnows
TraderKnows
07-08

Recently, an emergency election was held in France, and the results will directly impact the economy of France and even the world.

Many of France's allies breathed a sigh of relief at the results of Sunday's emergency election, as the far-right Marine Le Pen did not win. However, they also noted that the chaotic alliance in the hung parliament could pose problems for Europe.

Le Pen's National Rally (RN) was seen as the frontrunner, making it possible for France to have a far-right government for the first time since World War II, which could threaten the economic and foreign policy of the eurozone's second-largest economy.

In particular, allies of Ukraine were concerned that a Le Pen-led government might adopt a lenient stance towards Moscow and reduce military aid that Kyiv has relied on since Russia's invasion in 2022, despite her party later stating that Russia is a threat.

The failure of the National Rally has at least temporarily curbed the rise of the far-right in Europe, but it may signal a period of instability, with a new government coexisting uneasily with President Macron in an uneasy "cohabitation."

"There is enthusiasm in Paris, disappointment in Moscow, and relief in Kyiv. Enough to make Warsaw happy," Polish Prime Minister Donald Tusk said on the X platform.

Macron had called for the emergency election in an attempt to regain the initiative from Le Pen, but his party was surprisingly outperformed by the alliance of left-wing parties, taking first place and leaving his party trailing behind.

Several early reactions from overseas celebrated the avoidance of the immediate threat of a far-right government.

"The worst-case scenario has been avoided," said Nils Schmid, foreign policy spokesperson for German Chancellor Olaf Scholz's Social Democratic Party. During the cost-of-living crisis, the far-right has also become increasingly popular in Germany.

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Inflation

Inflation refers to the phenomenon where the purchasing power of a country's (or region's) currency decreases, leading to a general rise in the prices of goods and services. It is reflected in the fact that, over a certain period, the same amount of money can only buy fewer goods and services.

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