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French voters shocked the world on Sunday by rejecting Marine Le Pen’s efforts to see her far-right National Rally party take control of France’s legislature. And across the channel in Britain, a new government is set to enter parliament on Tuesday after voters last week gave the country’s left-leaning Labour Party a majority.

On today’s Big Take podcast, host David Gura discusses the reaction to the surprise result in France with Bloomberg Opinion columnist Lionel Laurent, and Bloomberg’s Head of Economics and Government Stephanie Flanders breaks down why the landslide victory for Keir Starmer and Britain’s Labour Party isn’t necessarily as clear-cut as it might seem.

For more, listen to Bloomberg’s “Voternomics” podcast.

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Here is a lightly edited transcript of the conversation:

David Gura: The headlines in France on Monday, after a snap election: 

Headline: “La claque”

Headline: “C’est Ouf”

Gura: “It’s crazy.”

Headline: “Et maintenant, on fait … quoi?”

Gura: “And now, what do we do”?

French voters shocked the world on Sunday, by rejecting Marine Le Pen’s efforts to see her far-right National Front party take control of France’s Parliament. 

The party’s leader, Jordan Bardella, said the result “deprived the French of policies that would fix the country.”

Jordan Bardella:  [in French] Tonight deprives the French of policies that would fix the country… 

Gura: Instead, it was the Far Left that came out on top, in the second – and final! – round of a snap election.

That coalition’s leader, Jean-Luc Mélenchon, said that the French had voted with their conscience and rejected the worst-case scenario…

Jean-Luc Mélenchon: [in French] Our people have voted with their conscience… our people have clearly rejected the worst case scenario…

Gura: This is tricky for French President Emmanuel Macron, whose Renaissance party came in second. Macron has asked the current Prime minister Gabriel Attal to stay on for now instead of resigning. Mélenchon has demanded that a left-winger should replace him.

Mélenchon: [in French] The President must bow and admit this defeat without attempting to bypass it in any way.

Gura: According to Lionel Laurent, a columnist for Bloomberg Opinion, France now faces a level of political division that is virtually unprecedented in the history of the Fifth Republic.

Lionel Laurent: It was a big shock – it was a big shock for the French media – this was not the international media getting it wrong. This was a big shock. I mean it really is a big moment.

Gura: Lionel says it could be weeks before we see any sort of coalition government, which means Europe’s second largest economy now faces a world of unknowns. 

Laurent: There is a rejection, a repudiation of Marine Le Pen, so clearly the Republican front worked. But no one quite knows what the French have voted for. So that’s the big question mark.

Gura: The surprise and the disorder in France stands in stark contrast with what’s playing out across the Channel. 

In the UK, Parliament will return on Tuesday with a new Prime Minister, Keir Starmer, and a new party in charge after 14 years of Conservative leadership.

Keir Starmer: You campaigned for it, you fought for it, you voted for it, and now it has arrived. Change begins now.

Gura: I’m David Gura, and this is The Big Take, from Bloomberg News. 

Today on the show, the impact of the elections in France and the UK, and the significance of a turn leftward. What it means for markets, geopolitics, and the global economy. 

President Emmanuel Macron’s surprise decision to call a snap election didn’t result in as dire a situation as had been predicted – but it didn’t result in a clear outcome either, according to Bloomberg Opinion columnist Lionel Laurent. 

Laurent: So the final count is in. First place we have the left wing, Popular Front bloc. They got 182 seats. Bear in mind the golden magic number is 289 for an absolute majority in the French parliament. And Le Pen’s far right group, which was tipped to really come in top or become the biggest group, is in third place with only 143 seats. Seats that’s that was that was the big shock and then in the middle second place, Emmanuel Macron’s centrist bloc has done better than expected. So the message is nobody has an absolute majority.

Gura: Lionel, President Macron’s decision to call for a snap election was characterized as a gamble. Did that gamble pay off?

Laurent: So it did and it didn’t. Basically what has paid off is that clearly the Republican front this willingness to choose, the voters to choose the lesser of two evils when it comes to keeping Marine Le Pen out of power has worked.

Macron has let’s say saved his centrist movement. That said though, it was clearly driven by tactical voting. There was a lot of dependency on the left to help save Macron’s movement and he, as a character, as a leader, is clearly weakened.

I mean his centrist bloc initially had an absolute majority, but that’s been withering over the years and it’s lost loads of seats. So clearly whoever leads the centrist bloc in the future, it’s not going to be Macron and they’ve I think won some time to choose a new leader and to bounce back from this. So I would say it’s half paid off.

Gura: What changed between the first round of voting and the second? It came out of the first round, the far right had this very sizable, solid lead. What happened between then and the second vote?

Laurent: So just to get through the the tactical part so essentially in several hundred districts, the left wing bloc and Macron’s bloc essentially agreed to respectively pull out their own candidates to not split the vote. It’s not a rare thing in France, it’s not a rare thing in many countries to have people simply pull out of a race But the amount of districts where that took place, well over 200, did I think create a situation where we’re wondering will voters actually turn out to vote because these parties are so different you’ll really be holding your nose to a great degree. So, will people get up off the couch? 

The other thing is that the French, this two round system really shows its worth in situations like this. The first round vote you vote with your heart you express anger. The message is sent. But the French basically opened the door and peered into, whatever you want to call it, the abyss, the pit of the Sarlacc. They took a look at what the reality of a Le Pen win would be and they said no.

Gura: Lionel, the last time you and I spoke a few weeks back, you told me that this decision to call the snap election was one that was born out of frustration with government dysfunction. It strikes me when you look at the political landscape now in France, that dysfunction really hasn’t gone away.

Laurent: Yes. I think we just have to accept that a new chapter is opening, and it is not a peaceful one where we’ve closed the door on Le Pen and open the door on some concordat that’s stable and long lasting. The first task is to actually build the coalition. There is some hard work, it’ll take time to build that government. And then a few months down the line, having tried to find some kind of common policies that people can agree on, which will frankly be very modest, maybe some tax increases, maybe some kind of watering down of Macron’s reforms, it’ll come time to do a budget.

And that is going to be tough. That’s going to be where the cookie crumbles. So we are entering a very volatile and fractious period to French politics and don’t forget that Le Pen has not gone away. She will have time now to become more competent and get ready to govern and crucially constantly attack, from the opposition benches, Macron and the parties that I’m sure she will castigate as the elite who are stealing the votes of the true French.

So it’s gonna get ugly, but I do think there is some value in having delayed or deferred whatever Le Pen has in store for the French.

Gura: As we look ahead to the coming weeks, the coming months, if we get the kind of paralysis and dysfunction that you and I’ve been talking about, what are the consequences going to be for the country? 

Laurent: Look, no one’s expecting fireworks. France has deep seeded issues. It has a very high debt load. It has an economy that’s growing below the euro area average. It’s in demographic decline. It has a productivity lag, an innovation lag with the US, and it clearly has a European leadership role that is at risk. So all of these issues are not going to be solved by a kind of coalition government that’s cobbled together from one day to the next. That’s not going to happen. 

But in terms of the kind of management of the day to day, what can we imagine? There, there are going to be some pretty tough discussions with Europe because that is the constraint. Financial markets are not going to give France much room for maneuver. There will be a constant testing with European partners and with markets as to what this government can do.

So frankly, I’m not expecting huge, ambitious policies. And it may simply be a question of how much extra can the government spend to deliver some of the purchasing power gains that the voters want without causing a financial crisis.

Gura: After the break, we head across the Channel to unpack election results in the United Kingdom, and we look at what France’s gridlock and Britain’s shift left mean for Europe… and for the rest of the world.

While the left’s victory in France came as a shock, in the UK, the left-leaning Labour party was projected to prevail in the most recent elections. And that’s exactly what happened.

It was a big win for a party that suffered a devastating defeat by the Conservatives under Boris Johnson just five years ago. 

The UK Parliament is sitting Tuesday, and the new Labour leader, Keir Starmer, has already started outlining his party’s plans:

Starmer: Today we start the next chapter, begin the work of change, the mission of national renewal, and start to rebuild our country.

Gura: To dig into the results and what they mean for the UK, I sat down with Stephanie Flanders, who runs economics and government coverage at Bloomberg. She’s also a co-host of the Bloomberg podcast “Voternomics.” 

I began by asking her to break down the results of the vote on July 4th:

Stephanie Flanders: Foremost it was just a massive kicking for the Conservative Party. The biggest loss of seat of any Prime Minister, in fact of any party in history, in a UK election. 250 members of parliament lost their jobs, often in seats where they thought they probably would have thought they’d be in there for life. 

And I think just to sort of crystallize it, 14 million people voted for Boris Johnson’s Conservative Party barely five years ago. This election that number was just 7 million.

Now, Labour did very well out of that. It actually got more than 400 seats, nearly two thirds of the seats. But it’s interesting to note that it really only got a third of the votes cast and actually got not that many more votes than in the last election. You have a system with two main parties that have national coverage. If one loses big, the other wins big, even if it’s with a relatively small proportion of votes.

And in the end, what matters to us, to the world, is that Keir Starmer is Prime Minister with an impregnable majority, and we shouldn’t expect that to change for, for five years.

Gura: Should we interpret this as a leftward shift or is this more just a rebuke of Boris Johnson? Is it a swing left as you see it?

Flanders: You know, I think the exceptional thing about the last 14 years of Conservative government is that they have all felt like very different governments. You know, we had five prime ministers, almost as many economic policies, business taxes went down and then up, then down, then up. We were in the European Union at the start of that period and then out.

So I would say it’s a move to the left, very sort of slight move to the left, at a time when many other countries in Europe, and potentially the US as well, have often been turning right. This government’s going to be a bit more oriented towards investing in public services and a bit more tolerant of increasing taxes at the margin.

But the woman we have coming in to be the first female Chancellor of the Exchequer, Treasury Secretary, used to work at the Bank of England. She’s pretty orthodox in her approach, Rachel Reeves. 

I think the big change, more than anything else, will be not the lurch to the left, but stability. You know, a vote for a new party was, in this case, a vote for stability, after quite a lot of psychodrama and upheaval.

Gura: As we move from Conservative leadership to Labour leadership, what does that mean for, for the country as a whole?

Flanders: You’re moving to a sort of traditional kind of, Labour leader. Keir Starmer’s a sort of straight talking lawyer. He’s not spent a lifetime in politics, in fact, he only came into Parliament about ten years ago, slightly less than that, in his early 50s. He was a lawyer. He’d run the crown prosecution service, so that’s a bit like being in the kind of chief US attorney. 

And there is no such thing as Starmerism. It’s not like his predecessor, Jeremy Corbyn, who many people will be remember. He’s wants to just get stuff done, or at least that’s the, that’s the, what he’s put across to people.

Gura: Stephanie, could you give us the lay of the land and describe the many challenges this new Labour government inherits? What’s the party’s focus going to be on day one?

Flanders: The focus has been throughout their campaign, and I think most economists would say it’s been in the right place, has been on growth, on the need to get Britain’s growth rate back up. If we had grown our same, the long term average rate since 2008, our economy would be 40 percent bigger. That’s how much we’ve fallen short.

And it’s true that lots of countries have struggled after the global financial crisis, but by and large, we have done worse than many, um and particularly on a kind of per head basis in terms of living standards. Our investment is among the lowest in the G7 consistently. And yet, partly as a result of the lower growth and the pressures on population and on the aging society, taxes are actually the highest they’ve been in 70 years.

And, you know, money’s extremely tight, so he’s going to have to try and square that circle, whilst avoiding a big squeeze on public service spending, which is otherwise coming down the track. And again, that all comes down to getting faster growth and higher investment, crucially.

Gura: We focused on these two major parties, but we did see one surprising result: the far-right Reform Party got 14 percet of the vote. The party’s leader, Nigel Farage, a pretty divisive figure in British politics. What should we take away from that?

Flanders: Well, it’s certainly true that Nigel Farage, this a very controversial figure, gets on quite well with Donald Trump, who’d originally said he was going to not be a big part of this election because he was more focused on the US. He wanted to go and hang out in Mar a Lago. He decided once the election was called to take over the party that he had helped to create, Reform UK, and has attracted an enormous amount of support explicitly from disgruntled conservative, more particularly the sort of anti-immigrant side, anti-European side of the Conservative Party. 

So how the rump Conservative Party decides to deal with him, deal with that party, what lessons they draw ideologically from this, is going to be a big challenge for the Conservatives.

Although I should say, you know, the interesting thing is we don’t have to care about the Conservatives for quite a long time [laughs] and their internal struggles. But it will certainly be interesting to watch what happens to the right of the UK, who are now out of power, given this rise of Nigel Farage.

Gura: It’s tempting to see the outcome of both the French and the British elections as a rejection of extremism, as President Joe Biden suggested in an interview with MSNBC on Monday:

MSNBC – Joe Biden: France rejected extremism, Democrats will reject it here as well.

Gura: But that might not be best take away. 

Nearly half of the world’s population lives in countries holding elections this year – and Stephanie and Lionel say that the results could serve as a wake-up call of a different sort for politicians running for re-election…

Flanders: The overriding lesson that I see from looking at all of these elections through this year is an anti incumbency feeling in most places that are truly democratic. Obviously, Russia, we’ve had very strong result for President Putin. But where you have a vibrant and functioning democracy, voters have mostly punished incumbents, you know, even in India, where Prime Minister Modi was returned much less emphatically than expected. We saw that with Milei in Argentina. Um, I think the other way in which we’re definitely in line with others is a vote against inflation.

Laurent: We have had an inflation shock in, in a lot of countries and that can really blow up a leader’s record, which seems otherwise great on paper when you look at the jobless rate, when you look at economic growth, but when people feel their real wages get squeezed, whether it’s in the US, whether it’s in France, whether it’s in the UK that really can change people’s lives and it can change the way people vote And so I think that even though we are exiting I guess the inflation shock I do think that there is a question that we, that everyone needs to ask which is have we really learned the lessons from this inflation shock? Are we sure we understand it? And are we sure we know how to fight the next one when it comes along?

Flanders: Voters are looking at the cost of food, cost of energy, cost of rent, other basics, they don’t like it, and they’re punishing governments for it.

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