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(Bloomberg) — French voters head to the polls on Sunday in what will likely be an unprecedented election for the European Union’s second-biggest economy. 

Marine Le Pen’s anti-migrant National Rally is projected to win the most seats in the lower house of parliament, which could make it the first far-right party to serve in government since the Vichy administration collaborated with the Nazis in WWII. 

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The main question is whether the party will win enough seats to get an absolute majority. This would not only pave the way for its president, Jordan Bardella, to become prime minister, but would also give it a strong enough hand in the National Assembly to easily push through legislation and remake France’s domestic agenda.  

President Emmanuel Macron called the snap vote four weeks ago in an effort to shore up support after his centrist alliance got trounced in an election for the European Parliament. This decision appears to have backfired, with his Ensemble coalition now slated to win between 95 and 162 seats in the 577-seat parliament, down from 250. 

The verbose president — who rarely goes more than a few of days without a speech, an interview or some sort of public event — hasn’t been seen in public for nearly a week.

Over the past four weeks of a frenzied campaign, the National Rally has watered down some of its more contentious proposals. But it’s still focused on dramatically cutting migration, stepping back from EU rules — including reducing how much it pays into the bloc’s budget — and undoing some of Macron’s pension reforms. 

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Here are the main things to watch: 

Winners and Losers

As of Friday — the last day polling companies are allowed to publish projections ahead of the vote — the National Rally and its allies were on course to finish first with 170 to 250 of the 577 seats in the National Assembly, according to six surveys released at the end of the week. That would be significantly below the 289 it needs to get an absolute majority.

The left-wing New Popular Front alliance is projected to win 140 to 198 seats, according to the surveys, while Macron’s group is on track for between 115 and 162.

Power Sharing

Any party or coalition that is able to get an absolute majority of 289 or more seats will control the lower house of parliament. That means it will be able to easily pass laws and a government backed by that group would be safe from the threat of no-confidence votes. 

If the group that gets a majority is from a different party than the president, which has happened three times since France’s current form of republic came into effect in 1958, it results in a type of power-sharing arrangement called cohabitation. 

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The president generally selects the leader of the party that obtained the majority as prime minister. But a combination involving the National Rally would be the first time it’s involved a party that’s never governed before. In this scenario, the president would be expected to focus on defense and foreign policy, while the opposition prime minister would be in charge of domestic and economic affairs. 

The delineation of powers between the two offices isn’t clear and this scenario would likely lead to clashes — if not legal proceedings — over who has the right to make certain decisions.

Hung Parliament

If a group gets the most seats but is short of an absolute majority, then it could form a minority government — like Macron’s current situation. But that also depends on the president, who has sole authority to appoint a prime minister. 

National Rally’s Bardella has said he would refuse the job if his party and its allies don’t get an outright majority in the National Assembly. The risk in this scenario is that no party has the leverage to govern, leading to governmental paralysis. 

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Macron could tap an apolitical technical figure for the job, but even if such a person were available, they would struggle to command authority in parliament where avowed anti-elite forces would be in the ascendancy. A more political figure — perhaps a moderate from the center-left — would still be vulnerable to no-confidence votes and the splitting of an ad-hoc centrist alliance. 

Turnout

Turnout is a crucial element to watch on Sunday, with figures expected from midday onwards. That will provide an early indicator of whether centrist voters stick to the time-honored tactic of casting a ballot for a candidate they may dislike to try to block the far-right from victory. The first round a week ago saw a surge in turnout to 66.7%, the highest since 1997.

The so-called Republican front — the electoral maneuver of rallying around the highest-placed candidate to block the far right in the runoff — has come under increasing pressure as many voters say they are sick of casting a ballot against rather than for a candidate. The contours of the front have also shifted after Macron slammed the far-left as “extreme” and some of his team called against voting for them, even to block the National Rally.

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Market Reaction

France’s CAC 40 Index has been the worst performer among major European stock indexes since Macron called the snap election last month, while at the peak of the selloff a metric of bond-market risk soared to its highest since the sovereign debt crisis.

Stocks rallied this week after the first-round vote eased worries about a far-right government, and overall market stress has receded.

Still, the CAC 40 remains roughly 4% below levels seen before the June 9 snap election call. The premium that investors demand to hold French government bonds over German ones stands at less than 70 basis points, below the peak of 86 basis points in the wake of the election call but well above the level of 50 basis points from early June.

Policies

The three leading groups in the elections are proposing radically different paths for France. 

Macron’s party stands for continuity, with more pro-business tax cuts and reforms, along with a commitment to curb spending. Responding to concerns of voters, his group has added pledges to improve the incomes of low earners by tweaking taxation, and measures to help home-buyers and the retired. 

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The National Rally has promised to reduce immigration, toughen France’s stance on law and order with more prison places and minimum sentencing, and cut value-added taxes on energy and fuel. Following a sell-off in French assets, the party has delayed some of its more costly measures — potentially indefinitely, depending on a review of public finances.

The New Popular Front has the most radical economic program. In the short run, it says it would freeze prices of consumer staples, abolish Macron’s pension reform and raise the minimum wage 14% and public sector salaries 10%. The extra annual spending, which is forecast to reach €150 billion ($163 billion) in 2027, would be entirely financed with new taxes on businesses, finance and the wealthiest. 

—With assistance from Ania Nussbaum, Samy Adghirni and William Horobin.

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