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2017 PRESIDENTIAL ELECTION French Presidential Election French economy recovery: where are we? Finalised at March 9 2017 France 2017 #2 Tristan Perrier Strategy and Economic Research This note is the second in a series that will accompany you until the results of the presidential and legislative elections (and probably a little further). Here we focus on an assessment of the French economy. Our next editions prepared by our economists and strategists will focus on other specific thematic topics: - An analysis of the blockings of the French economy and the reforms, seen by candidates and by international organizations - Presidential candidates and their position on Europe - French debt: state of play and points of attention - Margin rates of French corporates: where do we stand now? - Presidential candidates and their position on fiscal and tax policy - OAT yields and OAT/Bund spread: QE impact and perspectives - ... We wish you all a good reading. Philippe ITHURBIDE Global Head of Research, Strategy and Analysis Research,Strategy and Analysis French Presidential Election 2017 1 Jacques Cheminade <0,5% Marine le Pen 26,0% Nicolas Dupont-Aignan 2017 2,0% François Fillon PRESIDENTIAL 17,0% ELECTION Emmanuel Macron 25,0% Benoît Hamon 16,0% Jean-luc Mélenchon Voting polls: where do we stand? Philippe Poutou 12,0% 1,0% Voting intentions in the first round of the presidential election (2/4 March 2017) Nathalie Arthaud 1,0% (33% of respondents are unsure whether to vote or have not expressed any choice yet) Jacques Cheminade <0,5% Marine le Pen Ensemble Nicolas Dupont-Aignan Jean-luc Mélenchon François Fillon 2,0% 56,0% 17,0% Emmanuel Macron Benoît Hamon Benoît Hamon Emmanuel Macron Jean-luc Mélenchon Philippe Fillon Poutou François Nathalie Arthaud Marine le Pen 26,0% 54,0% 25,0% 49,0% 16,0% 12,0%39,0% 1,0% 61,0% 1,0% 76% Sources: KANTAR - SOFRES - onepoint, Amundi Research Certainty of vote in the first round of the presidential election (2/4 March 2017) Ensemble 54,0% (For each candidate, percentage of voters considering they are sure of their choice) Average Jean-luc Mélenchon 54%56,0% Jean-luc Mélenchon Benoît Hamon 49,0%56% Benoît Hamon Emmanuel Macron 39,0% Emmanuel Macron François Fillon 49% 39% 61,0% François Marine Fillon le Pen 61% Marine le Pen 76% 76% Sources: KANTAR - SOFRES - onepoint, Amundi Research Average 54% Voting intentions for the second round of the presidential election (9 March 2017) Jean-luc Mélenchon Hypothesis Fillon vs. Le Pen 56% Hypothesis Macron vs. Le Pen Benoît Hamon Evolution compare to the 23 february Emmanuel Macron 49% +5 +5 39% François Fillon 61% Emmanuel Macron François Fillon 65% 59% Marine le Pen 76% Marine Le Pen Marine Le Pen 35% 41% -5 -5 Sources: Harris Interactive, Amundi Research Research,Strategy and Analysis French Presidential Election 2017 2 2017 PRESIDENTIAL ELECTION Key points ■■ The French economy held up well during the recession but has been slow to recover. After weathering the double-dip recession of 2008-2013, GDP has recovered over the past four years at a positive but weak pace, which has yieled only a recent and modest decline in unemployment and consistently underperformed German economic growth. However, signs of improvement have recently appeared in corporate margins, investment and jobs. ■■ France stands out in the Eurozone with its twin deficits**, although they are not very large. Its public and private imbalances are sustainable as things currently stand but its debt and deficits would be sources of vulnerability if interest rates rose without an acceleration in growth and/or if there was a new recession. ■■ Economic policy in recent years has been marked by: 1/ fiscal policy aiming at gradually reining in the public deficit, first through tax increases (aggressive and long-lasting for households, despite a recent pull-back ; temporary on companies before being more than offset by payroll tax reductions), and then through savings on public spending; 2/moderate structural reforms in several directions, including a “flexisecurity” approach to the labour market. ■■ The now well-entrenched cyclical recovery has the potential to continue. The main short term risks are political and/or external. The French economy was less negatively impacted than many others by the economic and financial jolts of the 2008-2013 period, but its performance has been lacklustre since then – neither the Eurozone’s engine nor its “sick man”. Much the same can be said of the major French macroeconomic imbalances, which are undeniable but still bearable for the time being. French economic policy since 2012 has been marked by a steady approach to deficit-reduction and the launching of reforms in several areas, which are paying off, but only very gradually. I – A lacklustre economy that has consistently underperformed Germany in recent years France generates about 2.3% of global GDP* (with just under 1% of the world’s population) and 21% of the euro zone’s GDP. Based on many long-term performance metrics and competitiveness indicators, the country ranks generally average among developed economies. However, it suffers recurrently from an unfavourable comparison with its main partner, Germany, in many areas, starting with the unemployment rate, the share of industry in the economy, public debt, public deficit and foreign trade (still, the contrast in GDP growth is not as stark and depends on the period reviewed). France Germany Eurozone Public deficit, % of GDP, est 2016 -3.3 0.6 -1.7 Public debt, % of GDP, est 2016 96.4 68.2 92.3 Current account, % of GDP, 2015 -0.2 8.5 3.2 Unemployment rate, %, Jan 2017 10 3.8 9.6 Average GDP growth,%, 2014-2016 1 1.6 1.8 % of value added in Industry, 2014 14.1 25.9 20.1 Research,Strategy and Analysis French Presidential Election 2017 3 110 105 2017 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 100 PRESIDENTIAL ELECTION Germany France Italy Spain Eurozone Netherlands Source: Eurostat, Amundi Research GDP since the creation of the Euro (basis 100 in Q1 1999) GDP since the pre-crisis peak (basis 100 in Q1 2008) 110 145 140 140 106 135 135 104 130 130 102 125 125 98 120 115 96 115 110 94 110 105 92 105 100 90 100 120 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q1 1999 Q3 2011 Q1 2000 Q1 2012 Q1 2001 Q3 2012 Q1 2002 Q1 2013 Q1 2003 Q3 2013 Q1 2004 Q1 2014 Q1 2005 Q3 2014 Q1 2006 Q1 2015 Q1 2007 Q3 2015 Q1 2008 Q1 2016 Q1 2009 Q3 2016 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 100 2 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 1 145 108 Germany France Italy Germany Spain Eurozone Netherlands Spain Source: Eurostat, Amundi Research Allemagne France Espagne Eurozone France Italy Zone euro Netherlands Italie Pays-B Source:Eurostat, AmundiSource Research : Eurostat, Recherche Amundi 110 110 The has tended to108 widen this gap even more. 108 economy’s disappointing trajectory in recent years34.0% 106 104 106 33.0% 104 II – An economy that weathered the 102 recession 32.5% 100 32.0% well but has been slow to recover 100 3 98 98 Q3 2011 2012Q1 2013Q1 Q1 2012 2014Q1 Q3 2012 2015Q1 Q1 2013 2016Q1 Q3 2013 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 Q1 2008 2005Q1 Q3 2008 2006Q1 Q1 2009 2007Q1 Q3 2009 2008Q1 Q1 2010 2009Q1 Q3 2010 2010Q1 Q1 2011 2011Q1 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 31.5% The French economy did hold up well during the 2007-2008 recession, protected by its traditional 96 96 31.0% shock-absorbers (household consumption and public spending), a solid banking system, and its lower 94 94 30.5% exposure to international trade than Germany. It then suffered through a second recession during the 92 92 2011-2013 Eurozone sovereign debt crisis, but without30.0% a collapse comparable to those seen in Italy 90 90 and Spain, and without having investors raising too many 29.5%eyebrows at its public debt (safe for a brief period at the end of 2011). 29.0% Since 2013, French real GDP growth has moved back into positive territory but has stalled at Allemagne France Germany France Italy barely more than 1% annually, below the Eurozone average. A weaker recovery Spain or Espagnethan in Zone euro Spain Eurozone Netherlands the Netherlands may be due to the lack of pent-up demand because of a shallower previous decline, Source : Eurostat, Recherche Amundi Source: Insee, Amundi Research Source:Eurostat, Amundi Research but this cannot be the reason for its gap with Germany over the same period (during which German GDP expanded by 1.6% on annual average). While GDP has not accelerated, some notable improvements have nonetheless been seen over 110 34.0% the34.0% past few quarters: 105 33.5% 33.5% ■■ An improvement in corporate margins from lower levels than in other major euro zone countries, 33.0% 33.0%and which had bottomed out in late 2013. 100 32.5% 32.5% 31.0% 4 30.5% Research,Strategy and Analysis 85 French Presidential Election 2017 30.0% 4 29.5% 80 31.0% 30.5% 30.0% 29.5% 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 3 ■■ A rebound in investment, which had until then95 missed out on the recovery. This improvement has 32.0% 32.0% been seen in both business investment (driven by improved margins) and residential construction 31.5% 31.5% (which moved back into positive territory in 2016). 90 Q1 2014 Q3 2014 Q1 2015 102 2 33.5% Italie Pays-B 94 92 30.5% 92 90 30.0% 90 France Italy Spain Eurozone Netherlands French corporate margins (% of gross value added) PRESIDENTIAL ELECTION Allemagne Espagne France Zone euro Italie Pays-Bas France : components of private internal demand, basis 100 in Q1 2008 110 34.0% 33.5% 34.0% 33.5% 105 33.0% 33.0% 100 32.5% 32.0% 31.5% 4 31.0% 30.5% 32.5% 95 30 32.0% 90 25 31.0% 31.5% 30.5% 85 20 80 15 29.5% 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 5 30.0% 29.5% Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 1999Q1 Q2 2012 2000Q1 Q4 2012 2001Q1 Q2 2013 2002Q1 Q4 2013 2003Q1 Q2 2014 2004Q1 Q4 2014 2005Q1 Q2 2015 2006Q1 2007Q1 Q4 2015 2008Q1 Q2 2016 2009Q1 Q4 2016 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 30.0% 29.0% 2017 Source : Eurostat, Recherche Amundi Source: Insee, Amundi Research Source:Eurostat, Amundi Research 3 29.0% 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 Q1 2004Q1 2005Q1Q3 2006Q1Q1 2007Q1Q3 Germany 29.5% 2008 2008 2009 2009 2008Q1Q1 2010 2009Q1Q3 2010 2010Q1Q1 2011 2011Q1Q3 2011 2012Q1Q1 2012 2013Q1Q3 2012 2014Q1 Q1 2013 2015Q1 Q3 2013 2016Q1 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 31.0% Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 94 29.0% 10 GDP 5 Household consumption Corporate investment Residential investment Source: Insee, Recherche Amundi Source: Insee, Amundi Research 0 01-01 11-01 09-02 07-03 05-04 03-05 01-06 11-06 09-07 07-08 05-09 03-10 01-11 11-11 09-12 07-13 05-14 03-15 01-16 11-16 Source: Insee, Amundi Research Italy 105 Source: Eurostat, Amundi Research 100 100 30 90 25 135 85 20 125 10 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 120 6 5 GDP Household consumption Corporate investment Residential investment 80 15 115 10 110 PIB Consommation des ménages Invest. des entreprises 5 Invest. résidentiel Source: Insee, Recherche Amundi 105 100 01-01 11-01 09-02 07-03 05-04 03-05 01-06 11-06 09-07 07-08 05-09 03-10 01-11 11-11 09-12 07-13 05-14 03-15 01-16 11-16 Source: Insee, Amundi Research 0 95 30 90 25 85 20 130 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 80 15 5 Total employment, basis 100 in Q1 2000 95 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 Unemployment rate 95 4 Eurozone Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 105 ■■ A decline in unemployment, to 10% in January 2016 after peaking at 10.6% in August 2015, Netherlands with an acceleration in employment (+1.2% from Q4 2015110 to Q4 2016, vs. France +0.7% one year Spain Germany earlier). 0 02-00 01-01 12-01 11-02 10-03 09-04 01-01 08-05 11-01 07-06 09-02 06-07 07-03 05-08 05-04 04-09 03-05 03-10 01-06 02-11 11-06 01-12 09-07 12-12 07-08 11-13 05-09 10-14 03-10 09-15 01-11 08-16 11-11 09-12 07-13 05-14 110 Netherlands France Spain Germany Germany Pays-Bas France Italy Eurozone Spain Allemagne Eurozone Source: Eurostat, Amundi Research Italy France Espagne Italie Zone euro Source : Eurostat, Recherche Amundi Source: Eurostat, Amundi Research Looking at the most recent figures, we see that, after a relatively solid Q4 2016 GDP growth (+0.4% vs. 4 135 the initial business climate indicators for early 2017 135out a very optimistic message. Q3), are sending This indicators and the OECD’s 130 130 is the case, notably, for PMI Indices, the INSEE’s2 business confidence 125 120 115 Research,Strategy and Analysis 0 French Presidential Election 2017 5 -2 -4 125 120 115 115 10 6 5 5 105 100 01-01 11-01 09-02 07-03 05-04 03-05 01-06 11-06 09-07 07-08 05-09 03-10 01-11 11-11 09-12 07-13 05-14 03-15 01-16 11-16 0 10 110 Netherlands France Spain Germany 95 0 2017 02-00 01-01 12-01 11-02 10-03 09-04 01-01 08-05 11-01 07-06 09-02 06-07 07-03 05-08 05-04 04-09 03-05 03-10 01-06 02-11 11-06 01-12 09-07 12-12 07-08 11-13 05-09 10-14 03-10 09-15 01-11 08-16 11-11 09-12 07-13 05-14 PRESIDENTIAL ELECTION Pays-Bas France France Italy Allemagne Italie Eurozone than for other major developed Germany Espagne Zone euro Italy Eurozone Spain 2017, leading indicators (the latter were higher for France, as of January Source: Eurostat, Amundi Researchthe importance of those short Source : Eurostat, Recherche Amundi economies). However, term signals must not be exaggerated, all the Source: Eurostat, Amundi Research more so that several government measures (payroll tax cuts, support for construction, and tax cuts for certain households) have been calibrated to provide their full impact in 2016 and 2017, an impact that 135 may not recur with equal intensity from 2018 on. A 135 lasting improvement is needed 4 far greater and to both truly begin catching up with Germany and decisively remedy the French economy’s major 130 130 2 macroeconomic imbalances. 125 120 -2 III – Twin deficits**and debt: 115 sustainable... for -4the time 110 being 120 115 7 110 -6 General budget balance, % of GDP (estimations à partir de 2016) 2008 02-00 01-01 2009 12-01 2010 11-02 2011 10-03 2012 09-04 2013 08-05 2014 07-06 2015 06-07 2016 05-08 2017 04-09 2018 03-10 2019 02-11 01-12 12-12 11-13 2007 2006 2005 Cyclically-adjusted primary deficit, % of potential GDP (forecast from 2016 on) 4 6 2 4 0 3 0 2 -2 -3 0 -6 -2 -10 France Spain Eurozone 2019 2018 2017 2016 2015 2014 -8 -12 2001 2002 2003 2004 2005 2006 2007 2002 2008 2003 2009 2010 2004 2011 2005 2012 2006 2013 2007 Germany 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 -6 Allemagne Italie France Eurozone Eurozone Italy Germany Italy Spain Netherlands Source: Eurostat, Amundi Research Source : Eurostat, Recherche Amundi Source: Eurostat, Amundi Research France Espagne France also has a recurring current account deficit; although not a very large one (roughly 1% of6 GDP in 2014, according to Insee, its reduction to well below this 6level in 2015 and 2016 being due essentially to the lower oil bill). Its most problematic component is the balance in goods and services 4 4 deficit, which reflects insufficient external competitiveness. While all other major Eurozone countries have a current account surplus, France is therefore alone in showing2 twin deficits 2 8 0 0 -2 French Presidential Election 2017 Research,Strategy and Analysis -2 -4 6 -4 2017 -9 -4 2015 -8 2014 -6 2014 2008 2015 2009 2016 2010 2017 2011 2018 2012 2019 2013 8 -4 -12 2004 2002 Source: Eurostat, Amundi Research Source : Eurostat , Recherche Amundi Source: Eurostat, Amundi Research 7 2003 France’s public deficit is still slightly above the European threshold of 3% of GDP (at an 105 105 estimated 3.3% in 2016), but has shrunk steadily in-8recent years (since setting a record at 7.2% of GDP country to opt 100 for a far more gradual approach 100 in 2009), as market leniency has allowed the-10 95 than the drastic austerity imposed on its southern European neighbours. This improvement is due 95 -12 partly to the economy and partly to falling interest rates. However, the cyclically adjusted primary deficit, which reflects structural adjustments, has still shrunk from 3.4% to 0.9% of GDP since 2009. France The levelGermany of public debt, from 64% Allemagne in 2007) is slightly Germany France Italy aboveItalie Francemeanwhile, Italy at nearly 100% of GDP (up Espagne Zone the Eurozone’s average and far higher than Germany’s. However, years. Spain Eurozone Spain it has stabilized Eurozone in recenteuro 02-00 01-01 12-01 11-02 10-03 09-04 08-05 07-06 06-07 05-08 04-09 03-10 02-11 01-12 12-12 11-13 10-14 09-15 08-16 6 125 0 2016 5 100 80 2017 60 PRESIDENTIAL ELECTION 40 9 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Private debt is not excessive but is growing. In contrast to Italy and, even more so, Spain, it has continued to rise in recent years in France. Corporate debt, the growth of which is due more to weak margins than to investment, is now rather high compared to France’s large neighbouring countries (at Germany France Italy about 130% of GDP). However, it is not raising any major flags at this point. Household debt (57% of Spain Netherlands Eurozone GDP) is also on an upward trajectory, but is still far lower than just before the 2009 crisis in countries Source: Eurostat, Amundi Research that were later hit hard by serious mortgage debt crises. Gross Public Debt, % of GDP (estimates from 2016 on) Non-bank private debt, % of GDP 250% 140 230% 190% 100 100 170% 80 150% 80 130% 10 60 110% 60 90% 40 70% Germany France Italy Spain Netherlands Eurozone 50% 40 12-06 07-07 02-08 09-08 04-09 11-09 06-10 2000 2001 01-11 2002 08-11 2003 03-12 2004 10-12 2005 05-13 2006 12-13 2007 07-14 2008 02-15 2009 09-15 2010 04-16 2011 11-16 2012 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20 120 210% 20 Germany Spain France Allemagne Netherlands Espagne Italy France 2013 2014 2015 2016 120 9 140 Pays-Bas Italie Zone euro Source : BIS, RechercheSource Amundi: Eurostat, Recherche Amundi Source: Eurostat, Amundi Research For the moment, these imbalances are sustainable, even in an environment of slow growth. But both public and private debt would be heavy sources of vulnerability in the event of a new recession or 250% a250% sharp rise in interest rates without an acceleration in growth. 230% 230% 210% IV – Economic choices in recent years: 190% a gradual reduction of the public deficit, 170% moderate structural reforms 150% 210% 190% 170% 150% 130% Faced with a still-high public deficit and an unemployment rate that130% had been rising since the serious 110% 110% crisis of the late 2000s, the administration that took office in 2012 put through a policy whose main 90% directions have been the following: 90% 70% Germany France Italy 12-06 07-07 02-08 09-08 04-09 11-09 06-10 01-11 08-11 03-12 10-12 05-13 12-13 07-14 02-15 09-15 -Sharp tax increases in 2012 and 2013, both on households (VAT70% and income tax) and companies 50% 50% and capital (corporate income tax and capital gains tax), that were also intended to meet new spending promised during the campaign programme (which was far to the left). 12-06 07-07 02-08 09-08 04-09 11-09 06-10 01-11 08-11 03-12 10-12 05-13 12-13 07-14 02-15 09-15 04-16 11-16 10 Allemagne France -Corporate Spaintax cuts beginning Netherlands in 2014: a three-year €40bn programme, mostly tax credits and Espagne Pays-Bas cuts in social contributions). Taxes on households continued to rise in 2014 before decelerating Source : BIS, Recherche Amundi Source : BRI, Recherche Amundi sharply from 2015 on. Research,Strategy and Analysis French Presidential Election 2017 7 Italie 2017 PRESIDENTIAL ELECTION New taxes, total for the 2012-2017 period (including the effect of decisions taken by the previous administration), €bn Corporations -18.5 Households 47.3 Corporations & Households 11.1 Fight against fraud 2.8 Total 42.6 Source: OFCE -- Savings on public spending, beginning in 2015: a €50bn, three-year plan involving national and local administration and social welfare, of which roughly €40 bn should indeed be implemented by the end of 2017. -Structural reforms along several lines, including: -- the job market: several reforms between 2013 and 2016, guided by a “flexicurity” approach to make layoffs easier and to simplify and decentralise labour negotiations (at a sector or company level, rather than at national level). Measures have also been undertaken to generate savings in the pension system. -- the market for products and services: measures for simplifying standards; creating greater competition and streamlining healthcare organization. -- the administration, particularly at the local government level: with a merger of regions, development of the metropolitan area status and incentives for municipalities to group activities at an “intercommunal” level. However, these reforms (some of which were pushed by Emmanuel Macron, who served as advisor to the president and then minister of the economy) have met with fierce resistance, forcing the government on several occasions to lower the bar (particularly in easing the conditions of layoffs, the opening up of some professions to competition, and the reduction of municipalities’ prerogatives). The unpopularity of some reforms (in addition to the tax hikes), the fact that they were counter to campaign promises, and the fact that this type of reforms generally takes time to pay off are among the main reasons for President François Hollande’s lack of popularity, that led him to decide not to run for re-election. * IMF estimate according to its purchasing power parity methodology. ** A country is said to be running twin deficits if it has a public deficit (its public agencies spend more than they collect in taxes and other revenues) and a deficit in its trade with the rest of the world. Economic theory suggests that there is a link between these two deficits. Research,Strategy and Analysis French Presidential Election 2017 8 2017 PRESIDENTIAL ELECTION Conclusion As 2017 begins, the current phase of political uncertainty is therefore unfolding in the midst of an economy that, while still growing at a disappointing pace, has nonetheless improved in recent quarters and should continue to improve in the coming months. Although the effects of some short term policy measures could lose strength in 2018, and while the measures implemented by the future government (especially the fiscal stance) could affect the detailed growth outlook, the positive trend is also supported by important cyclical factors (employment and investment) and some of the gains of the reforms undertaken in recent years are probably yet to come. The main risks to a further recovery do not reside today in domestic economic factors, but in political shocks that could jeopardize the continuity of Eurozone institutions, whether originating from France or from other Eurozone countries, or in external events that could undermine the current cycle of expansion in the global economy. Research,Strategy and Analysis French Presidential Election 2017 9 2017 PRESIDENTIAL ELECTION France - Financial markets in a nutshell 2y. bond yield United States Germany France 10y. bond yield United States Germany France 2y. bond yield spread France Italy Spain 10y. bond yield spread France Italy Spain Sovereign CDS 5y. France Italy Spain Equity markets EurostoXX 50 DAX 30 CAC 40 MIB 30 IBEX 35 Credit markets ItraXX main ItraXX XO ItraXX Financials sen. ItraXX Financials sub. Exchange rates EURUSD EURGBP EURCHF 1m. implied volatility VIX VDAX EURUSD 09/03/2017 Change over the week Ytd 1,28 9,99 9,41 -0,84 2,50 -7,10 -0,49 -2,00 16,90 2,45 8,25 1,02 0,29 2,50 7,70 0,92 -2,00 23,20 35 -5 24 82 -10 23 70 7 21 63 -12 16 185 -14 25 141 -4 24 57 -11 19 184 0 26 75 -4 -1 3381,3 1,42 2,76 12052,9 0,88 4,98 4959,8 1,40 2,01 19352,9 2,83 0,62 9729,8 2,49 4,04 71 -3 -1 281 -13 -8 88 -6 -5 202 -17 -20 1,05 -0,50 0,11 0,86 1,89 0,61 1,06 -0,08 -0,74 12,5 0,8 -1,5 14,7 0,5 -3,2 7,9 -0,9 -2,4 Research,Strategy and Analysis French Presidential Election 2017 10 2017 PRESIDENTIAL ELECTION Read more ■Taking stock of the situation and decrypting current issues (already published) ■An overview of the French economy; ■Rigidities of the French economy and potential reforms: the opinions of international organisations and of the candidates for the presidential election (forthcoming); ■Europe: what do the candidates for the presidential election think about it precisely? (forthcoming); ■French debt: state of play and points of attention (forthcoming); ■Margin rates of French companies: where do we stand now? (forthcoming); ■The positions of the candidates for the presidential election on fiscal and tax policy (forthcoming); ■French bond yields and OAT / Bund spread: ECB’s role and perspectives (forthcoming) Research,Strategy and Analysis French Presidential Election 2017 11 2017 PRESIDENTIAL ELECTION In the European Union, this document is only for the attention of “Professional” investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments (“MIFID”), to investment services providers and any other professional of the financial industry, and as the case may be in each local regulations and, as far as the offering in Switzerland is concerned, a “Qualified Investor” within the meaning of the provisions of the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Advertising under the Collective Investment Schemes legislation of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation. This document neither constitutes an offer to buy nor a solicitation to sell a product, and shall not be considered as an unlawful solicitation or an investment advice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material. 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If you are concerned that any of the information we hold on you is incorrect, please contact us at info@ amundi.com. Credit photo Alexandre Guirkinger. Document issued by Amundi, a société anonyme with a share capital of 746 262 615 € - Portfolio manager regulated by the AMF under number GP04000036 – Head office: 90 boulevard Pasteur – 75015 Paris – France – 437 574 452 RCS Paris - www.amundi.com
