(Bloomberg) -- At his Wednesday press conference, Emmanuel Macron brandished the prospect of economic Armageddon should the far-right end up in government, calling on voters to not succumb to the “fever of the extremes.” Trouble is, that time-honored strategy has proved to be increasingly ineffective.  

In the three days of political chaos wrought by Macron’s decision on Sunday to call a snap legislative election — following his party’s bruising defeat in the European Parliament vote to Marine Le Pen’s surging National Rally — the airwaves have been filled with dire warnings and news of alliance talks between parties — most of which have yet to present party programs. 

When he offered a hastily assembled campaign program, Macron repeatedly said that Le Pen would “impoverish” savers and scare off investors by reversing his politically unpopular reforms like raising the retirement age. He echoed his Finance Minister Bruno Le Maire, who on Tuesday went as far as to predict a debt crisis should the National Rally come to power.

That approach was very effective in the past. In 2017, when Macron first faced Le Pen, he won the presidential election with a comfortable lead after he pointed to the risks of her party’s plan to pull France out of the euro. But his margin of victory declined in the 2022 rematch after she eliminated some radical ideas from her program. Macron also lost his absolute majority in the subsequent legislative vote as the National Rally secured a historic foothold. 

Now, with the far right making breakthroughs in Europe and elsewhere, such warnings from mainstream parties risk falling on deaf ears. In neighboring Italy, Prime Minister Giorgia Meloni has defied naysayers, wooed bond investors and won the respect of leaders who were, as recently as two years ago, suspicious of her origins in the country’s euroskeptic hard right.  

“‘Me or chaos’ no longer works,” said Melody Mock-Gruet, a constitutional expert who specializes in parliamentary affairs and teaches at Sciences-Po. “The RN at the gates of power no longer scares a majority of French people.” 

Once shunned for its racist and antisemitic stances, the National Rally has succeeded in its transformation into a more acceptable group, she said, adding that Macron’s party needs to build a real alternative, with allies and clear proposals.

Macron made a broad pitch to what he called social democrats and the republican right to ally with his centrist group to produce a majority. He set out five key policy areas, ranging from boosting the economy to investing in public services and military independence. To appeal to right-wing voters, he spoke of boosting security and responding firmly to crime, cutting illegal immigration, and making sure religious laws don’t trump those of the state.

The possibility of an National Rally government has spooked markets. The yield on 10-year government bonds jumped more than 10 basis points this week, touching 3.33% on Tuesday, the highest since November. 

Polls show the National Rally has a substantial lead going into the first round of voting on June 30. However, the two-round system in France means rival parties can unite to block the far-right’s path in the second vote July 7.

But while mainstream parties have been able to count on people voting to block the far right in the past, that dynamic has lost steam, with the share of French people who outright reject Le Pen declining. According to a poll of 1,002 French voters on Tuesday by Odoxa for Le Figaro, 24% of people said they would vote to block Macron’s party, only slightly fewer than the 27% who would do so to stand in the way of Le Pen’s group. 

It doesn’t help that Macron remains extremely unpopular. In an Elabe poll on Wednesday, 72% of the people surveyed said Macron is a handicap for his camp. Macron’s allies warn that his campaigning style could hurt his party, in an echo of David Cameron’s Brexit mistake. Some of his advisers have suggested he take a back seat in the campaign.

“To be honest, I’m not sure it would be completely healthy for the president to go on the campaign trail,” Edouard Philippe, Macron’s first Prime Minister in 2017, said on BFMTV Tuesday. “He’s president at a time when institutions will clearly be subjected to turbulence.”

One casualty of his call for election has been France’s main conservative party, which has been torn apart by disputes over how to respond to the emergence of a populist rival on the right. On Wednesday, leaders of the French Republican party agreed unanimously to expel their president, Eric Ciotti, after he announced a pact with the far right ahead of the election.

Meanwhile, officials in Brussels who lived through the ordeal of the UK exit from the European Union have been horrified by Macron’s decision to call an election and worry that he’s repeating the same mistake. Le Pen’s party taking control of the legislature for the first time might threaten Macron’s response to the war in Ukraine and his effort to rein in the budget deficit, while reverberating across Europe’s relations with China and the US in the face of the potential return of Donald Trump to the White House. 

Part of the challenge for Macron are the priorities of French voters coming out of the harshest inflation crisis since the 1970s. That has pushed incomes and the cost of living to the top of lists of worries while debt and deficits are of relatively little concern. Le Pen has made progress appealing to people concerned about their own personal financial situation, with promises such as lowering sales taxes. 

At the same time, Macron has lost credibility on macro issues as the budget gap widens and credit agencies downgrade France. According to Erwan Lestrohan, research director at polling institute Odoxa, those issues are central to constituencies including higher skilled workers and older people.

“The question of economic competence is crucial for Macron’s electorate,” Lestrohan said. “Attacking the credibility of the National Rally on these topics can certainly fuel concerns and bring back French people who are worried France’s economic place in the world.”

On a morning radio show Wednesday, Bank of France Governor Francois Villeroy de Galhau, sought to explain the importance of fiscal discipline.

“France isn’t bankrupt,” he said on Radio Classique. “But we need to gradually reduce our deficit because our public deficit at more than 5% of GDP is one of the highest in Europe — that can seem abstract, but it has very concrete consequences.”

Inside Macron’s campaign, pointing to the economic risks of Le Pen is still seen as an effective strategy, and the rout on French markets is a clear vindication, according to a person familiar with the campaign. 

“French women and men are intelligent, see what is coherent and what is incoherent and are able to distinguish between expressing anger and having a serious project,” Macron said. “So I don’t at all believe the worst can happen.”

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