Now comes the difficult part
François Fillon’s victory in the right primary shows many French voters reject populism and desire wide-ranging reforms. But now comes the difficult part: 1) being elected in the Presidential election next spring against the Front National and possibly several centrist candidates and, 2) implementing the reforms proposed during the campaign.
The Le Pen risk is higher than with Juppé
We continue to believe that the risk of Marine Le Pen being elected President next year is low (c.10%). There remains a majority of French people united against the Front National in major elections. However, the risk is higher with François Fillon than with Alain Juppé given the former’s more radical agenda, which is likely to scare some centrists, not to mention left-wing voters.
Would Fillon then deliver as President?
Fillon’s public savings programme looks too ambitious to be realised in five years, in our view, and poor social cohesion and low market pressure could slow reforms. But, if elected, Fillon would have a real mandate for reform and his referendum on a unique social regime could help break union opposition. All told, the French elections could be the positive surprise of 2017.
Investment ideas – Consequences of a Fillon Presidency
Fillon’s tax cuts could give a short-term boost to the economy and French corporate profits could rise by c.23%. His plan would be more negative for consumers due to the VAT hike. In our mid-cap universe, our analysts believe his policies could benefit Korian (+), Orpea (+) and Lisi (+) and should be neutral / slightly positive for property developers such as Nexity (=) and Kaufman & Broad (+). We also assess the possible impact on staffing, utilities and defence names.