The French stock index CAC40 experienced a significant decline of over 6% last week, marking its worst performance in two years, Report informs via MarketWatch.

As a result of this sharp decline, the market capitalization of the French stock market has fallen to $3.17 trillion, which is now lower than the British market’s $3.23 trillion, according to data from FactSet.

This downturn is mostly attributed to the announcement made by French President Emmanuel Macron on June 9, following the defeat of his party in the European Parliament elections.
Macron declared the dissolution of the National Assembly (the lower house of parliament) and appointed early elections.

Analysts at Goldman Sachs predict that if the far-right party of National Rally, which significantly outperformed Macron’s Renaissance in the European Parliament mandates, wins the upcoming French parliamentary elections, the stock market decline may continue.

However, a more likely outcome is that no single party will obtain a majority in the National Assembly.

Such a political deadlock would limit the risks of major economic measures being adopted. Nevertheless, the debt-to-GDP ratio is likely to deteriorate, given the difficulties in passing necessary spending constraints through parliament to reduce the government deficit and the structural reforms needed to stimulate economic growth, Goldman Sachs experts said.

The market would breathe a sigh of relief if Macron’s allies and center-right Republicans were to secure an absolute majority, according to the bank’s analysts.