Macroeconomist Robin Brooks published an article on October 29th analyzing the market impact of the 2027 French presidential election, arguing that the policy space for populist parties in Europe hinges on whether their countries are debtor or creditor nations. France and Italy have high public debt levels, and their financing costs are influenced by market sentiment and expectations of support from the European Central Bank (ECB). If a new government engages in a fierce conflict with the EU, it may face rising bond yields and financing pressures. Therefore, even if Le Pen comes to power, her policies may be constrained by fiscal limitations. The European Commission projects that France's public debt-to-GDP ratio will rise from 115.6% in 2025 to 120.2% in 2027, with the fiscal deficit expected to reach 5.7% of GDP during the same period. In contrast, Germany is a major creditor nation in the Eurozone. If the Alternative for Germany (AfD) pushes to limit the ECB's support for highly indebted countries, it could threaten the Eurozone's financial stability mechanism. Brooks believes that the core contradiction in European politics and debt risk is shifting from the traditional left-right political divide to a conflict of interests between creditor and debtor nations.
