“Euro Exit Would Ruin France,” More Russian Hacking, And Other Fun Overnight News

In what I imagine will be a preview of the week to come, there were plenty of headlines out overnight regarding the ever changing political landscape in France.

As you’re well aware by now, the French elections are the most important scheduled geopolitical event in 2017 (and I stress “scheduled” there because invariably, the most important sh*t isn’t ever “scheduled”).

If Marine Le Pen sweeps to victory it would amount to the most resounding win yet for the populist uprising that threatens to undermine the very foundation of Western democracy. Beyond that, it would set the stage for a €1.7 trillion sovereign default and a particularly sticky situation for € IG investors who would suddenly need to figure out how to hedge €410 billion in French investment grade debt against a potential redenomination event.

For those interested in keeping up to speed on this most important of tail risks, here’s a rundown of the overnight headlines along with a chart that shows the spread between French and German default risk is blowing out commensurate with the widening of the OAT-bund spread.

Via Bloomberg

• Russia “expresses preferences for” right-wing presidential candidates Marine Le Pen and Francois Fillon, while independent candidate Emmanuel Macron is under cyberattack, French Foreign Minister Jean-Marc Ayrault tells Journal du Dimanche in an interview.
• Exiting the euro, presidential candidate Marine Le Pen’s project, would ruin France, Bruno Le Maire, adviser of French Republican candidate Francois Fillon, says on Europe 1 radio.
• French socialist candidate Benoit Hamon who has been seeking to unify the Left for the presidential race “won’t run after” the far-left candidate Jean-Luc Melenchon, if he doesn’t want to join forces, according to Le Parisien on Sunday. Hamon spoke Saturday on the sides of his trip to Portugal
• “I am the best positioned to make the Left win. I call upon voters to follow me.”
• I will keep on being the Left’s union architect. If some don’t want to take part, fine. I won’t run after Jean-Luc Melenchon’’
• On Friday evening on BFM TV, Melenchon said he doesn’t intend “to hang on to a hearse”
• Talks Between French Candidates Jadot, Hamon Going Well: JDD
• Discussions between French ecologist candidate Yannick Jadot and socialist Benoit Hamon to agree on a common political project ahead of presidential elections are “going well,” Jadot tells Journal Du Dimanche.
• Hamon and Jadot teams have disagreement on future of the nuclear arsenal: JDD
• NOTE: Pascal Cherki, adviser to Hamon, told Agence France Presse Saturday that Melenchon had “closed the door” on an alliance
• French socialist candidate Benoit Hamon says it is impossible to him that the Left has no candidate in the second round of the presidential election
• Hamon says far-left candidate with whom he’s trying to join forces has set ’strong conditions’ to a single candidacy
• Hamon says his priority is to speak to voters, not other candidates
• Hamon speaks Sunday in interview with radio RTL and TV channel LCI

And finally…

• France 5Y CDS vs Germany pares the lag between OATs pricing increased political risk on the leading presidential candidates and Le Pen tail risk, Bloomberg strategist Tanvir Sandhu writes.

(Bloomberg)