Geopolitics and Luxury: Following the Shock of the French National Assembly’s Dissolution, What Are the Repercussions for Luxury?

France is still reeling from the shock, less than 48 hours following the announcement of the National Assembly's dissolution.
According to Jean-Paul Garraud, president of the French delegation of the ID group in the European Parliament, “the National Rally had been preparing a ‘Matignon plan’ for months because the possibility of this dissolution was unlikely but possible.” These statements reveal a great deal about the shaky political situation in which France has found itself for months, caused by the lack of a parliamentary majority that had made it difficult for Emmanuel Macron to exercise power.
How will the economy - and particularly the luxury sector - react to this wave? The CAC 40 stocks have already fallen, and the euro has weakened.

The resulting uncertainty will likely generate a decline in activity - caution is essential - which can only affect the French GDP. Above all, luxury is a sector with a vital need for stability. The fact that France has always been, despite some upheavals, a democratic and stable country has enabled it to be a cradle and a laboratory for high-end brands. It is here that the two giants, LVMH and Kering, thrive, and it is here that new trends and collaborations abound.

What will happen in the future? According to several analysts, including political journalist Perrine Tarneaud, a cohabitation between the National Rally (RN) and Macron in power “would make the country ungovernable. We don't quite understand the president's choice.”
Shrewd strategy or ego-driven impulse for which Emmanuel Macron is often criticized? The future of the luxury economy depends on this interpretation. It is possible that Macron will leave the door open for a young Jordan Bardella as Prime Minister to show the French that the RN does not have the capacity to govern. This would prevent the far-right party from winning the next presidential election in 2027.

Indeed, Marine Le Pen's program is opaque on economic issues. Unlike the Atlanticist and liberal Italian Giorgia Meloni, the RN is more inclined towards protectionism, which would be an obstacle to relations with foreign markets, the lifeblood of most luxury houses and large corporations in general (80% of the CAC 40’s profits come from abroad).

The domestic market would also be problematic, regardless of the RN's choices: the mere existence of a major political crisis will almost certainly lead to an increase in interest rates on all loans, weakening the purchasing power of the French. At the same time, euro depreciation will increase overall inflation. What about foreign investments in France? The country has maintained a stable rating with rating agencies also because Macron's “start-up nation” continues to attract many foreign investments, competing with the United Kingdom, which lost market confidence after Brexit.

Will this confidence remain intact? At the Pavillon Chesnaie du Roy, where the National Rally celebrated its victory, Marine Le Pen began her speech by saying, “Nous sommes prêts” (’We're ready’). However, the business world might not be yet.