Emmanuel Roman is one of the most senior Frenchmen in global finance. A former Goldman Sachs employee, he is now based in California, where since 2016 he has headed up PIMCO, the world's largest bond market management company, with $1.9 trillion (approximately €1.77 trillion) in assets under management (equivalent to two-thirds of France's GDP). This global debt specialist warns of possible market sanctions should the Rassemblement National (RN) come to power. He also believes that the rapid rise in US debt "is not sustainable."
We are witnessing the growth of populist movements all over the world, in Latin America, in the United States, with a total fracture of the political world, and in France too. From a macroeconomic point of view, the real problems in Europe are the high level of debt and inflation. So, politics aside, the only real issue is deciding what to do about public debt: Either raise taxes or cut public spending. Having read the Rassemblement National's program and its 22 points, I can say that there isn't a single element addressing the real macroeconomic issues.
Markets are capable of taking a longer-term view. They know that Europe has been through many ups and downs and has been able to manage complicated situations, like Greece, for example. That said, an economic policy that doesn't make sense is immediately punished by the market. What happened with Liz Truss in England [British prime minister in September and October 2022] is a perfect example. She had tried a different economic policy [introducing the biggest tax cuts since the 1980s, letting the deficit slip]. In the space of a week, she was severely punished by the markets with an unprecedented shift in the yield curve in England.
Markets quickly correct any economic policy that lacks sense, and this is true for any country. However, the difference with the UK is that in Europe we have a central bank [the European Central Bank] which is there to keep an eye on things. Because France is within Europe, the danger is relatively small.
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