Banks Pull Back From Funding French Politics

(Bloomberg) -- The money has always followed the power in French politics, as the party in office has built-in advantages for financing campaigns. Now, that gap is widening, with banks becoming more reluctant to make up the shortfall.

As he prepares for European Parliament elections in May, President Emmanuel Macron has a two-part edge: free airtime from a series of public debates and enough money to fund his party’s activities. Cash-strapped rivals are begging for donations and relying on volunteers.

It wasn’t always this way. Only one major party, Marine Le Pen’s National Front, was turned down for a loan during the 2017 presidential campaign. Now, in the run-up to the May 26 EU vote, no party has secured bank financing.

That makes for an uneven playing field in an election many think could decide Europe’s future, with the contest shaping up as a clash between parties like Macron’s, that favor EU integration, and Le Pen’s, now re-branded as the National Rally, that want power returned to national capitals.

“I’m going through the usual hell with the banks” said Wallerand de Saint Just, treasurer of Le Pen’s, who’s considering tapping supporters for money after getting rejection slips from 12 banks. “At least this time I’m not alone, others are having to go through it too.”

Government Refund

French parties used to have a relatively easy time getting loans. Since the government refunds expenses up to a pre-set limit for any party surpassing an-easy-to-reach voting threshold, loans were traditionally seen as nearly risk-free.

For this year’s European campaign, parties can spend up to 9.2 million euros ($10.6 million) and get up to 4.3 million euros back just by winning 3 percent of the vote.

Even leftist parties hostile to banks, like France Unbowed’s Jean-Luc Melenchon, were able to get financing in 2017. France Unbowed is having a tougher time now: the group met with both banks that financed Melenchon’s presidential run, without hearing back from either, according to Manuel Bompard, co-head of the party’s European slate. The party may seek loans from supporters, while leaning on unpaid volunteers, he said.

For Generation.s, a new leftist party that’s also been turned down by banks, the formula is “second-class train tickets, cheap hotels, cheap meeting rooms, lots of volunteers,” party Treasurer Bastien Recher said.

Ability to Pay

“Banks finance political parties through loans based on their projects and ability to repay,” the French Banking Federation said in response to a request for comment.

Party treasurers say an increasingly acrimonious political atmosphere and less reliable polling has made banks wary of being associated with politics. France has also become more vigilant about campaign financing in the wake of 2016 charges against Republican Party of using fake invoices.

All of this adds up to an advantage for Macron, whose LREM party will fund its EU election campaign out of cash on hand, according to spokesman Antoine Guery.

That’s possible because public funding for parties is based on performance in the last legislative election -- and LREM crushed the field in that vote.

As a result, Macron’s party gets 22.5 million euros from the state each year, compared with 12.9 million euros for the Republicans, who were forced to sell their Paris headquarters in February, raising 46 million euros.

The Socialists also sold their Paris headquarters in 2017, for 45.5 million euros. Still, the party plans to cap its spending for this year’s campaign at 4.3 million euros, the ceiling for reimbursement.

“We went to see banks last month because interest rates are low,” party treasurer Pernelle Richadot said. “But everything is conditioned on polls, it’s a real danger to democracy.”

The most recent poll for the May election put LREM and its allies at 22 percent, the National Rally at 21 percent, the center-right Republicans at 13 percent and France Unbowed at 9 percent.

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