Le grand escape! Panicking French elite bombard wealth managers with enquiries about moving to Italy and Switzerland amid growing fury over victorious hard-left's plans for 90% tax on rich and huge spending increases
- New Popular Front alliance proposed a major tax-and-spend economic policy
The surprise victory of the New Popular Front (NFP) in France's elections has set alarm bells ringing for the nation's wealthy as the hard-left alliance plans to roll out an eye-watering 90% income tax on high earners.
Even before the election took place, financial advisers reported a huge influx of enquiries off the back of Emmanuel Macron's decision to call a snap election, with well-off French citizens considering a move to more fiscally favourable territories such as Italy, the historic tax haven of Switzerland, and Spain.
But the victory of the NFP over Macron's centrists and the hard-right National Rally (RN) this Sunday has forced France's elite to seriously consider how their fortunes would fare given the very real prospect of a dramatic tax-and-spend economic policy.
The hard-left alliance plans a huge spending spree that would deliver a major boost to minimum wage and public sector pay, reduce the pension age from 64 to 60 and freeze prices of essential goods - measures it claims will cost some €150 billion over three years.
But Macron's camp warned it could cost as much as €300 billion and will entail the scrapping of tax breaks and credits for companies as well as soaring income tax.
Ministers have also warned against such a spending spree given that France is already grappling with a budget deficit of 5.5% of GDP.
'People are worried about a wealth tax, the end of the flat tax and potential higher taxation on salaries, as well as an overall atmosphere that is not pro-business,' said Vincent Lazimi, a partner at law firm Jeantet in Paris, in comments leading up the the snap election.
Gregory Soudjoukdjian, a Parisian wealth adviser, told the FT following Macron's election call: 'I'm not sure I've had this many calls since the start of my career... our high-end clientele are asking themselves a lot of questions.
'The question we get asked most frequently is if money is safe in France,' he added.
Leader of La France Insoumise (LFI) Jean-Luc Melenchon talks to journalists on July 9, 2024
Emmanuel Macron avoided that which he feared the most in France's stunning parliamentary elections yesterday as Marine Le Pen's hard-right National Rally failed to scoop an absolute majority, instead suffering a shock defeat
French finance minister Bruno Le Maire lambasted the tax-and-spend economic policies set forth by the left-wing New Popular Front (NFP) alliance
Bicycles burn during tensions near Republique plaza following the second round of the legislative elections, Sunday, July 7, 2024 in Paris
Participants gather during an election night rally following the first results of the second round of France's legislative election at Place de la Republique in Paris, France on July 7, 2024
Young people shout slogans at the rally held after the results of the second round of the legislative elections were announced at Place de la Republique. Paris (France), July 7, 2024
The concerns of France's wealthy were raised as the finance minister declared the nation is facing the prospect of an 'immediate financial crisis' after the government was left in deadlock following the narrow NFP victory.
Bruno Le Maire celebrated the loss of the hard-right RN, which Macron's centrists had feared could storm to a majority, but warned warring parties must come to an agreement and form a coalition in short order.
He also lambasted the economic policies set forth by the NFP, writing: 'The most immediate risk is a financial crisis and France's economic decline.
'The application of the New Popular Front's disruptive programme would destroy the results of the policies that we have pursued for seven years...
'This project is exorbitant, ineffective and dated. Its legitimacy is weak and circumstantial. It must not be applied,' he concluded.
Defying the predictions of political experts, French polls and the world's media, the New Popular Front alliance (NFP) - led by Jean-Luc Melenchon and his France Unbowed party (LFI) - came from behind on Sunday to eke out a victory with 182 seats in France's National Assembly.
That placed them just ahead of President Macron's centrist 'Together' coalition on 168, while the hard-right National Rally (RN) ended up in third place with just 143 seats, despite having led the race convincingly after the first round of elections just one week ago.
This means the overwhelming majority of seats are now split fairly evenly between three factions, all of which harbour very different ideas about the future of France with little interest in forming a coalition.
Melenchon - a permanent fixture of the French left and a divisive firebrand dubbed the 'French Jeremy Corbyn' - has declared the NFP must be given the reigns so it can begin implementing its policies.
'The president must invite the New Popular Front to govern,' he said, characterising the election results as a damning indictment of Macron and his centrist party.
But his hopes of personally dragging France sharply leftward appear dead in the water after members of Macron's party ruled out forming a coalition with what they see as a tax-and-spend, pro-Gaza figure who many in France view as an antisemitic radical.
Former Prime Minister Edouard Philippe, who is seen as a possible Macron successor in 2027, said any potential coalition government 'cannot be the work of a single man' and dismissed any prospect of working with Melenchon's hard-hard left LFI, or the hard-right RN.
'The credibility of our country could be damaged by this and the centrist political forces must without compromise make an agreement to stabilise politics - but without France Unbowed and the RN,' he said.
Even leading members of Melenchon's own alliance have admitted they do not think he is the right man for the job.
Socialist leader Olivier Faure claimed Melenchon 'is the most divisive figure within the NFP,' while one Greens party lawmaker speaking on condition of anonymity said bluntly: 'Melenchon is a problem.'
Manuel Bompard (pictured), coordinator of France Unbowed, said the coalition was 'preparing to govern'
While France's political factions continue to squabble with no immediate prospect of a stable coalition, Macron is seeking to capitalise on the chaos
The president refused the resignation of his protégé Prime Minister Gabriel Attal (pictured) and instructed him to stay in place as the government sits in limbo
Founder of left-wing party La France Insoumise (LFI) Jean-Luc Melenchon gestures following the first results of the second round of France's legislative election at La Rotonde Stalingrad in Paris on July 7, 2024
PARIS: A protester throws a projectile near burning bicycles during clashes with police after the exit polls
A crowd of demonstrators gather on the Republic square in Paris to celebrate the victory of the left-wing NFP alliance
PARIS: French CRS riot police run past burning bicycles during clashes with demonstrators
While France's political factions continue to squabble with no immediate prospect of a stable coalition, Macron is seeking to capitalise on the chaos.
Yesterday, the President refused the resignation of his protégé Prime Minister Gabriel Attal and instructed him to stay in place as the government sits in limbo to continue presiding over the day-to-day management of the country.
Macron will be hoping that Attal remaining in his post will portray his centrist 'Together' alliance as a stabilising force, and that the Prime Minister will help to maintain some kind of political continuity as Paris gears up to host the Olympic Games at the end of the month.
But the president has given no further indication as to what his next move may be.
In a sign of rising tensions between the left and the Élysée Palace, LFI president Manuel Bompard suggested that Macron was trying to defy the will of the people by maintaining Attal.
He urged Macron to 'respect' the election result, adding: 'There is no question of Gabriel Attal's contribution as Prime Minister, wiping out the vote of the French people.'
Macron's supporters have a very different view of the election, which they said ended inconclusively.
Gerald Darmanin, Minister of the Interior of France, said 'No one won' and claimed that both the Rally and the NPF 'had lost'.
Sylvain Maillard, an MP with Macron's group, said the search for a new prime minister could take 'several weeks'.
'The French people have chosen a parliament with three blocks of roughly equal size,' he said, adding that the centrist bloc would be open to forming a government with other MPs except those belonging to Marine Le Pen's RN or Melenchon's LFI.
Macron's office has simply said the will 'wait for the new National Assembly to organise itself' before making decisions on a new government.
There is no firm timeline for when Macron must name a prime minister, and no firm rule that he has to pick someone from the largest party or bloc in parliament - but an ongoing political paralysis would spell disaster for the nation.
Under France's Constitution, he still holds power over foreign policy, European affairs and defence, and is in charge of negotiating and ratifying international treaties.
The president is also the commander-in-chief of the country's armed forces and holds the nuclear codes.
