France falls into economic chaos as UK embraces stability
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Illustration: Tiffany Herring/Axios
Over the past eight years France has watched with schadenfreude as its ancient rival, England, fell into political and economic chaos. Now, however, the tables are turned.
Why it matters: Both French President Emmanuel Macron and U.K. Prime Minister Rishi Sunak called surprise early elections to take place in the next couple of weeks. But while a stable U.K. outcome is easy to predict, France is much more likely to enter a period of discord and turmoil.
Driving the news: France's bond spreads have blown out and are now trading wider than Portugal, and its stock market has sold off to the point at which London once again has the highest market capitalization in Europe.
- Analysts increasingly expect to see a far-right majority in the French parliament, which could increase fiscal spending, decrease funding for Ukraine, and break ranks with pan-European economic and industrial policies.
The other side: The City of London, meanwhile, is experiencing something of a resurgence. The FT's Patrick Jenkins reports that the Square Mile — the heart of the financial-services industry — is going to have to build about 16 million square feet of office space over the next 15 years to keep up with demand.
- "Banking has largely withstood the challenges of Brexit and the 2008 financial crisis a decade earlier," he writes. "Private equity has boomed. And insurance, the particular specialism of the area, remains world-leading after a record year."
The bottom line: In the 1980s, a right-wing government in the U.K. deregulated its financial sector just as the Socialist party in France was nationalizing its banks, giving Britain a structural lead over its rival that still hasn't entirely dissipated.
- Ironically, markets now clearly prefer the prospect of a left-wing victory in Britain to the specter of a right-wing parliament in France.
