The Daily Update - French election / Italy downgrade

For the first time in over 50 years, a mainstream party candidate has not made the run-off in the French presidential election. Independent candidates Emmanuel Macron and Marine Le Pen will now fight for the presidency. In the final count centrist Macron polled 23.75% of the vote with far right candidate Le Pen coming just behind on 21.53% of the vote. After the results were announced, Conservative candidate François Fillon, who polled fewer than 20% of the vote, backed Macron for the presidency, saying there was no choice but to vote against the far right. Rival Socialist and Conservatives candidates also threw their support behind Macron, urging their supporters to reject Le Pen’s anti-immigration and European policies.  

Within hours of the result the mudslinging had already started with Florian Philippot, the deputy leader of Le Pen's National Front party saying that ‘Emmanuel Macron is not a patriot. He sold off national companies, he criticised French culture’ in a TV interview. Philippot went on to say that Macron’s victory celebrations at Paris’s famous Café de la Rotonde restaurant was disdainful towards the French people and was ‘bling-bling biz’. We get the feeling that in the coming weeks this Presidential campaign will be anything but boring.

Also on Friday Fitch announced it had downgraded Italy’s sovereign debt one notch to BBB, in-line with Moody’s rating and one notch above S&P’s, citing banking problems, economic growth, fiscal slippage as well as a weak government and political risks ahead of the 2018 elections. The downgrade was no surprise as Fitch had already put Italy on a negative outlook in October last year. Last year Italy’s public debt hit a record high of over 130% of GDP, only Greece has a higher percentage debt ratio in the eurozone.

‘Italy's persistent track record of fiscal slippage, back loading of consolidation, weak economic growth and resulting failure to bring down the very high level of general government debt has left it more exposed to potential adverse shocks’ Fitch were quoted as saying, adding ‘This is compounded by an increase in political risk and ongoing weakness in the banking sector, which has required planned public intervention in three banks since December’.

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