Whilst it will be some time before we know whether Mr. Macron is more of a Modi than a Trump, however we sense the markets are prepared to take a great deal on trust – this good news for eurozone equities and the euro.
Could French President Macron could be the catalyst for significant broad change in the EU? Indeed, ironically, could the UK be trying to leave the ‘old’ EU when at the time they eventually leave they could find themselves exiting a new EU that is much more palatable.
I have been struck by the sheer pace and scale of the change in France. This is not a revolution with quite the same strap line translated as ‘liberty, equality, fraternity’, however ‘En Marche’ has been a catalyst for a shift of French politics probably not seen in modern times.
Mr. Macron appears to be acting as an agent for change in the EU. The cornerstone of his domestic reform program is tackling economic issues that have plagued France for decades, namely a bloated public sector and rigidities in the labour market. We will see whether there is push back from within France despite his sizeable majority in parliament. Another iconic element of the French life ‘La resistance’ may be prevalent when the labour reforms in particular see the light of day. In 2016 the last labour reforms drawn up by Mr. Macron when he was economy minister led to five months of protest.
At an EU level Mr. Macron preaches for a more integrated EU that has a single finance minister and a common budget.
What is clear though is that Mr. Macron has added into the EU mix a young very ambitious politician with fresh ideas. Even Angela Merkel this week acknowledged the winds of change. It is unlikely that she will give significant endorsement to the new wave of thinking until after her own parliamentary elections in September. However her acknowledgment in speeches made in the past 10 days that she agrees with direction of thinking suggests maybe a broader shift in political thinking in the EU is underway.
For the asset markets the more reform minded cohesive thinking even if still aspirational could be a catalyst for further gains in both the eurozone equity markets and the euro against the dollar.