The French presidential election, or Présidentielle 2017, is comfortably the most important election in Europe this year, also because an Italian election has yet to be called. The leader of the Front National, Marine Le Pen, looks set to make it through the first round and, unlike her father in 2002, has an actual shot of becoming France’s next president. If this happens, the scenario of France leaving the Eurozone would become an imminent possibility. But how big are the chances of this happening, really?

Asking the question is much easier than answering it. Opinion polls, which have lost a lot of their shine after poor performances during Brexit and the US elections, are scattered. This is partly the result of the French election system, which takes two rounds (the two candidates that get most votes in the first round go head-to-head in the second.) Opinionway, sponsored by French newspaper ‘LesEchos’, expects Le Pen to lose 36 to 64 in the second round to pro-European Emmanuel Macron. As a gentle reminder, opinion polls estimated that Mr. Trump had about 40% chance of winning the US presidency right up until election day. Based on this experience, Marine Le Pen has a very solid chance of winning the presidency.

Other polls allocate (much) lower odds to a Le Pen win. Bloomberg is at 31%, while London-based asset manager Algebris gives Le Pen just an 8% chance of winning. Algebris tries to catch voters’ preferences using simulations based on polling data. An important factor that leads to differences between polls are the assumptions on what happens when the election moves from to the first round to the second. Will voters, who’s candidate did not make it into the second round, automatically vote for the remaining candidate that is up against Le Pen? In this case the odds of Front National winning the elections shrink significantly. But reality could be less straightforward. For example, what about the divide between republican voters, who seem to have little chance with Francois Fillon competing.

That opinion polls are far from the holy grail is nothing new, especially after last year’s disappointing performance. But even if they are wrong, a Le Pen win doesn’t necessarily mean France will leave the Eurozone. The Front National leader has said to seek a national referendum on the topic within six months after the elections. But interestingly, support for the Eurozone among the French is still close to 70%. So, assessing if France will actually leave the Eurozone requires the inclusion of the referendum odds. From this angle, Italy could pose a bigger risk.

What about markets? They suggest not to worry too much at this point in time. ‘Yes’, the spread between the yield on French and German 10-year bonds is close to the highest level in four years, but also significantly lower than at the height of the peripheral debt crisis.

Nothing to worry about then? You will not hear me say that. I think bond markets are a bit too complacent concerning the France elections. Maybe not directly related to the odds of a Le Pen win, although these are very significant, but to the potential impact it can have. The Front National has made leaving the Eurozone the spearhead of its campaign. This involves the creation of a ‘new’ French Franc. Not only does this mean the core of the Eurozone, consisting of France and Germany, is ripped apart, is also brings a massive amount of uncertainty concerning France’s enormous debt pile of almost 100% of GDP.

This is because roughly 80% of France’s government debt, of EUR 2.1 trillion, was issued under French law. The Front National would seek to ‘redenominate’ the debt issued under French law into the new currency. Hence, EUR 1.7 of French debt could be ‘repaid’ in a currency of which nobody knows  what it’s really worth. In addition, rating agencies have already suggested that a currency transformation will immediately trigger a French default. Needless to say that this will certainly cause a lot of (market) anxiety. With this possible impact in mind, the current market implied default probability of less than 5% looks  benign. Keep monitoring Le Pen!