French Presidential Elections

Socialist Francois Hollande and President Nicolas Sarkozy progressed to the final round of France’s election, with the incumbent’s hopes of victory resting on winning supporters from Marine Le Pen’s anti-euro National Front.

Hollande took 28.6 percent of the vote against 27.1 percent for Sarkozy, the Interior Ministry said in Paris. The anti- immigrantLe Pen got 18.1 percent, a record for the party that surpassed the predictions of all pollsters. The second round takes place on May 6.

The presidential race was thrown open by Le Pen’s performance, which highlighted voters’ angst in the face of unemployment at a 12-year high, immigration and a worsening debt crisis in the euro region. While Hollande’s first-round lead was narrower than polls predicted, Sarkozy must now appeal to National Front supporters without alienating more moderate voters.

“He’s going to have to hunt right-wing voters,” said Antonio Barroso, a political analyst at Eurasia Group in London. “That’s a bad dynamic for the second round when you normally want to capture the center and unite the country.”

Hollande would beat Sarkozy by 56 percent to 44 percent in the final round, according to separate surveys conducted after the results by the CSA polling company and Harris Interactive.

French bonds and the euro declined today. The euro was down 0.4 percent to $1.3164 as of 9:03 a.m. in Paris, while French 10-year bond yields rose 5 basis points to 3.131.

Le Pen’s showing surpassed the 16.9 percent that propelled her father into the second round in 2002 and came after a campaign in which she slammed Sarkozy and Hollande as “Siamese twins” who offered no solutions to France’s problems.

Her performance channeled voter concerns about foreign workers taking French jobs, terrorism and the global financial crisis, issues that Sarkozy tried to tap during the campaign.

The risk for investors is that he may now be tempted to step up his criticism of the European Central Bank in a bid to boost his pro-growth credentials, said Holger Schmieding, chief economist at Berenberg Bank in London.

“The first round may offer a glimmer of hope for Sarkozy,” he said. “But it also entails a risk that he could pander to right-wing sentiment on European issues in the next two weeks. Stronger calls for a ‘growth mandate for the ECB’ and the like may not go down well in Berlin and Frankfurt.”

Hollande, 57, started drawing the battle lines for the second round, highlighting Sarkozy’s appeal to anti-immigrant sentiment.

“I have no doubt he will use all the elements of fear,” he told reporters at Brive-La-Gaillarde, central France, before flying to Paris. “I am stronger because I came first.”

Sarkozy, the first incumbent since 1958 not to win the first round, said the results represent a “vote of crisis.”

The French are “suffering faced with the new world that is taking shape,” he told supporters in Paris. “These worries, I know and understand. They rest on the respect of our borders, the fight against off-shoring and the crisis of immigration, the recognition of work and security.”

Sarkozy won’t tailor his policies for the second round, said campaign spokeswoman Nathalie Kosciusko-Morizet. “He has a project for France, the project won’t change, and now he has a real chance to present it to the French,” she said today on France2. “The first round was nine against one.”

About 57 percent of Le Pen voters will back Sarkozy in the second round, while 23 percent will abstain and 20 percent will back Hollande, according to a survey by the BVA polling company.

In yesterday’s vote, Communist Party-backed Jean-Luc Melenchon got 11.1 percent and self-styled centrist Francois Bayrou won 9.1 percent. Melenchon supporters will vote overwhelmingly for Hollande in the second round, while Bayrou’s backing is split into thirds between Hollande, Sarkozy and abstention, polls show.

CSA estimated turnout at 79 percent, below 2007’s first- round level of 84 percent.

Sarkozy’s term has been dominated by a financial crisis which started just months after he took office in May 2007 and is still ricocheting through Europe’s bond markets.

Sarkozy, 57, argues that he protected France during the financial crisis by saving its banks and is pushing to expand the ECB’s mandate to include spurring economic growth rather than just fighting inflation.

Hollande has pounced on his economic record, pointing to an unemployment rate that has now risen to 9.8 percent. France’s economy has also been hurt by Europe’s debt crisis, which contributed to France losing its AAA credit rating for the first time in January.

Sarkozy said last night that he wants three debates before the second round, focusing on economic, social and foreign policy issues. Hollande said he’ll agree to only one debate, the same as in 2007.

Kosciusko-Morizet said that Hollande is afraid of confronting Sarkozy.

“Politics is not boxing,” Michel Sapin, a Hollande campaign aide who has been mentioned as a possible finance minister in a Socialist government, said in an interview with France Info radio today. “Sarkozy just wants constant confrontation.”

While Sarkozy must try to reach out to National Front voters, Hollande must also overcome the relatively poor performance of Melenchon, a potential ally, if he’s to become the first Socialist to win the presidency since Francois Mitterrand in 1988.

“The combined score of the left is not as strong as expected,” said Vincent Tiberj of the European Research Center at Science Po. in Paris. “Francois Hollande had a good first round but he has fewer reserves than expected. The second round will be a tighter race than expected.”

Hollande starts the campaign for the second round with a committed core equal to about 43 percent of the electorate, Sapin said. “The battle is not won,” he said. “He has to speak to all the French.”

Source: Bloomberg