Macron to Continue Talks on Premier After Rejecting Leftist Pick

(Bloomberg) -- French President Emmanuel Macron will continue consultations on appointing a viable prime minister on Tuesday after ruling out a government led by leftist candidate Lucie Castets in favor of a possible centrist coalition.

Macron began a series of meetings on Friday to sound out party chiefs on a compromise to try to end weeks of uncertainty following his decision to call snap elections that left no group with a majority in the National Assembly.

Castets, the candidate proposed by the New Popular Front, would “immediately be rejected by all the other groups” in parliament, according to a statement distributed late Monday by Macron’s office after talks with Marine Le Pen of the far-right National Rally and other party leaders.

Discussions with centrist parties allied to Macron “identified possible avenues for coalition and cooperation,” according to the statement. “These groups have shown openness to supporting a government led by someone from outside their ranks,” it added, inviting socialists, environmentalists and communists to collaborate.

Le Pen told Macron earlier Monday that her group would oppose a New Popular Front prime minister. The group — which includes Socialists, Greens, Communists and the far-left France Unbowed — claimed the right to propose a premier after it won the most seats in the election and nominated 37-year-old civil servant Castets.

Le Pen flatly objected, saying she won’t back anyone from the alliance because it includes Jean-Luc Melenchon’s France Unbowed. She dismissed comments he made this weekend suggesting he’d be open to a Socialist-led government without any ministers from his party.

“This changes strictly nothing,” she told reporters after meeting with Macron in Paris. “It’s Jean-Luc Melenchon who would actually rule this government.”

The New Popular Front has 193 out of the 577 seats in the National Assembly, meaning Castets would be vulnerable to a no-confidence motion that would bring down her administration. While the choice of premier is not up to Le Pen, National Rally and its allies have 142 lawmakers, making them a key part of Macron’s political math.

The president’s aides had been dismissive of Castets, citing reluctance in parliament to work with Melenchon’s movement. The conservative Republicans have also rejected the idea.

Melenchon told TF1 television on Saturday this was “a pretext, it’s the program you don’t want.”

What Bloomberg Economics Says...

“A very fragmented parliament means the most extreme political outcomes have become very unlikely. But finding a majority will be tough – the next government will be fragile and political uncertainty will remain elevated...This unstable political situation makes it even less likely France will manage to comply with EU fiscal rules and bring debt back to a sustainable path. This is making markets jittery.”

—Maeva Cousin (Economist) and Eleonora Mavroeidi (Economist). Click here for full INSIGHT.

Macron’s decision to call a snap vote after his group was trounced by the far right in European Parliament elections in June triggered a major selloff in French assets and led to weeks of political uncertainty.

French stocks tanked relative to the rest of the European Union and have yet to recover. The spread of 10-year French debt over equivalent German bunds, a measure of perceived additional risks, has also barely declined.

Addressing entrepreneurs at the Medef annual business conference on Monday, National Assembly President Yael Braun-Pivet said the euro area’s second-biggest economy can’t afford to ignore its public-debt challenges and that it needs stability to preserve the trust of investors.

“We must avoid policies that dogmatically destroy reforms that have gotten results,” she said. “While it takes 10 years to build confidence, it takes only a few days to undo it.”

Since the elections in July, France has been governed by a caretaker government that cannot be toppled by the National Assembly, which is divided into roughly three forces: the left, the center and the far-right.

Potential candidates for prime minister floated over the weekend include Renault SA Chairman Jean-Dominque Senard and Pascal Demurger, head of mutual insurance company Maif.

The president, whose role it is to appoint a new prime minister, has said he wants parties that represent “republican forces” to build a broad majority from the political center, with Macron typically excluding the National Rally and France Unbowed from that group.

--With assistance from William Horobin.

(Updates with Macron statement starting in first paragraph.)

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