French far-right National Rally leader Marine Le Pen told Emmanuel Macron her group would oppose a prime minister from the leftist New Popular Front alliance as the president seeks to identify a candidate able to govern with a divided parliament.

Macron began a series of meetings on Friday that are continuing on Monday to sound out political party chiefs on a possible compromise in order to end weeks of uncertainty following his decision to call snap legislative elections.

No group emerged in a position to form a majority in the National Assembly. The New Popular Front has claimed the right to propose a premier, however, after it won the biggest number of seats and has put forward 37-year-old civil servant Lucie Castets.

Le Pen flatly objected, saying she won’t back anyone from the alliance because it includes Jean-Luc Melenchon’s far-left 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 just 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 have so far been dismissive of Castets, citing reluctance in parliament to work with Melenchon’s movement. The conservative Republicans have also rejected the idea.

The far-left leader told TF1 television last Saturday this was “a pretext, it’s the programme you don’t want.”

“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,” said Bloomberg Economics Maeva Cousin (economist) and Eleonora Mavroeidi (economist). 

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

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

Representatives of the New Popular Front - which includes Socialists, Greens, Communists and France Unbowed - have told Macron they want an answer on Tuesday as to whether he will nominate Castets.

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.

Macron will meet later with the head of the Senate.

  - Bloomberg