The Wednesday Letter #227 - 7/3/2024
The Wednesday Letter #227 - 7/3/2024
THIS WEEK: French Cohabitation; Biden Crashes; Foreign Risks of an Impaired President; The Market in the First Half of 2024; Walgreens on a Slope; Investing in the Invisible.
FRENCH COHABITATION
After the first round of France’s legislative elections, it is clear that the populist right (aka far-right) Rassemblement National (RN) will have the largest number of deputés in the new Assemblée Nationale (France’s lower house of parliament), if not a clear majority. President Macron’s party had a poor showing but the outcome of the legislative vote does not force him to resign. The president is elected separately and Macron can remain in office until the end of his term in 2027. However, the new distribution of seats in the Assemblée does de facto force him into power-sharing (cohabitation in French) with a prime minister, probably Jordan Bardella of the RN, who is not of his own party.
In the past, one form of France’s checks and balances was to schedule the presidential and legislative elections at different times, sometimes years apart (both have five-year terms). This changed after President Jacques Chirac (Gaullist, center-right) was forced into cohabitation with prime minister Lionel Jospin (socialist) in 1997-2002. After this experiment was deemed unsuccessful on many fronts, France aligned the legislative elections to take place immediately after the presidential, and to thereby provide the newly elected (or re-elected) president with a solid mandate. While this made presidential rule easier, it also undermined checks and balances because the legislative outcome was always similar to the presidential by dint of being held so close in its wake.
By dissolving the Assemblée and calling for a snap election, right after the European Union June elections and while he still has three years in his term, Macron went back to the old model of misaligning the presidential and legislative elections, creating once again the possibility of cohabitation. Although it is not ideal for a president to do without the mandate of a legislative vote shortly after his own elevation, the return to the old form does restore the previous checks and balances, and as such could diffuse some of the anger and polarization of the past decade. The US version of checks and balances in this regard is to vote for only one third of the senate in presidential election years, and to have terms of only two years in the House. But in France, a deputé’s term is five years, unless the Assemblée is dissolved.
Of course, Macron could pull another surprise and resign after his party gets resoundingly defeated, as is expected, in the second round. Why would he do that? One theory is that such a move would give the RN the rope to hang itself (in Macron’s presumed calculation) by electing an RN president, most likely Marine Le Pen. Resignation would also allow Macron to run for president a third time and to come back as the reasonable centrist savior after a period of RN misrule (in his expectation). The constitution does not allow Macron to run for a third term after two complete terms. But some interpretations say that he could indeed run for a third term if he resigns from his current term.
Meanwhile with the RN winning the first round, and the even more problematic and anachronistic leftist coalition Nouveau Front Populaire coming in second, “France’s centre cannot hold,” as The Economist said on its cover this week. The British magazine was perhaps borrowing from The Second Coming poem by William Butler Yeats. Here is the first stanza, with fingers crossed that it will not apply to France:
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.