French markets are jolted by new polling showing that far-right candidate Marine Le Pen is closing the gap on incumbent President Emmanuel MacronBefore the country’s Presidential Election.

On Wednesday, Macron was projected to have a 26.5% vote share to Le Pen’s 21.5%. This compares to Macron’s 28% and Le Pen’s 17.5% respectively in the previous poll from March 21-24.

French bonds fell sharply Tuesday after a new poll was released, sending the benchmark 10-year yieldIts highest level since 2015, and the CAC 40Stock index fell by nearly 1.3%, falling behind the rest of Europe. It continued its decline on Wednesday.

Macron still has a chance to win, but Le Pen is in the strongest polling position of her far-right National Rally party leader. This platform is focused on restricting immigration and increasing law enforcement funding. A wealth tax and new promises by the National Rally have also been offered to working people worried about their living standards.

The candidacy of Éric Zemmour, seen as even further to the right than Le Pen, has aided her efforts to appear a more moderate option than previously perceived and become palatable to portions of the center-right disillusioned with Macron’s tenure.

Antonio Barroso (teneo’s deputy director of research) stated in Wednesday’s note that voters were beginning to align around candidates who have the best chance of winning the race-off. Le Pen gained voters from Zemmour.

Barroso acknowledged that there was an increase in the chance of Le Pen’s victory, however Teneo sees Macron still holding onto the presidency at 75%.

The fear of Le Pen as the next president has caused some market anxiety. This is due to concern about Europe’s political and economic unity after Russia invades Ukraine.

Le Pen had shown sympathy for President Vladimir Putin in the past and is now openly skeptical of the European Union.

Barroso stated that Le Pen managed to ignore criticism about her Russian past connections, and instead focused her message on rising living costs with unrealistic, popular measures like eliminating the income tax for those under 30.

“The fact there have been no proper debates between candidates could be helping her to become the most trustworthy candidate on the buying power issue. Macron has lost the rally ’round flag dividends in recent days.”

Le Pen has resigned from campaigning for an EU exit or the election after losing in 2017’s run-off. euroHowever, her rise to the presidency could cause problems for the bloc.

Kallum Pickering is a senior economist at Berenberg. He stated in Wednesday’s note that Le Pen will not be able reverse European integration but further progress could stall.

Her agenda of protectionionism, reform rollbacks and subsidies, as well as harsh immigration measures, would lead to many disputes with the EU. Pickering indicated that France could be taken to the European Court of Justice by the European Commission if it violates EU rules in several cases.”

“Her spending plans could be in violation of EU fiscal rules, once they are reinstituted in 2024 following a possible new suspension in 2023 because Putin’s war.”

Macron’s economic reforms were implemented quickly after his election in 2017. He cut taxes on wealthy investors, relaxed hiring rules and eased firing restrictions. The French economy appears to have rebounded more quickly than its counterparts, after it entered the Covid-19 epidemic during periods of poor performance.

Berenberg believes Macron’s reforms will position France to be the EU’s growth engine over the next decade. Pickering disagreed and said that this could be in danger with Le Pen leading the charge.

He said, “While a fiscal boost in the short term may be able to sustain near-term momentum,” and that subsidies, protectionionism, and reform rollbacks could hurt France’s potential growth.