At Any Rate Global Economics, FX and Rates: French political scenarios for macro markets
Aug 28, 2025
Raphael Brun-Aguerre from JPMorgan's European economics team and Aditya Chordia, a European rate strategist, dive into the intricate ties between French political dynamics and macroeconomic outlooks. They discuss President Macron's strategies for navigating political instability and the implications for investment behaviors. The conversation pivots to the impact of political announcements on bond markets and the widening spreads between French and German bonds. They also explore trends in the Eurodollar landscape amid fiscal uncertainties, offering a cautiously optimistic outlook.
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Rushed Confidence Vote Raised Political Risk
- Raphael Brun-Aguerre says Macron rushed the confidence timetable, reducing room for negotiation.
- That haste made a government fall on September 8th more likely and limited concessions on fiscal targets.
Macron's Limited Options And Fiscal Focus
- Raphael outlines Macron's main options: form a broader centrist coalition, call elections, or (unlikely) resign.
- The fiscal stance will remain a central debate and uncertainty will weigh on investment and spending.
Initial Tightening Was Much Larger Than Expected
- Beirut proposed ~1% of GDP structural tightening, well above EU-required 0.5% adjustment.
- Negotiations likely trim that to EC-compliant moves, implying only modest fiscal tightening next year.