LONDON Jean-Luc Melenchon, the far-left tax-and-spend candidate in France's presidential election, has surged in opinion polls before Sunday's first round vote and yet he isn't the main reason for growing nervousness on financial markets.
Reflecting the topsy-turvy state of politics and financial markets today, it is far-right candidate Marine Le Pen who investors still regard as the greater risk.
In more normal times Melenchon would be their obvious bete noire, proposing a 90 percent income tax band on the country's top earners and expressing openness to taking France out of the European Union.
He has climbed to as much as 20 percent in recent polls from below 15 percent last month, closing in on Le Pen in what has become a tight four-horse race to choose the two contenders who will go through to the run-off on May 7.
That has set off a wave of market volatility. One-week implied volatility in the euro/dollar exchange rate this week is on course for its biggest jump since the euro's launch in 1999.
Compared with the two more centrist candidates, Francois Fillon and Emmanuel Macron, Melenchon is an isolationist; he has promised a referendum on a French exit from the EU if his demands to renegotiate its position within the bloc aren't met.
His manifesto also calls for withdrawal from the NATO military alliance and the International Monetary Fund, vetoing of international free-trade accords, ending the European Central Bank's independence and taking control of Bank of France.
Risky though this may sound for investors, whose confidence is built on the certainty of the single European market and common currency, he is sill not as risky as Le Pen; the National Front candidate is campaigning on a platform of 'Frexit' - taking France not only out of the EU but out of the euro too.
Le Pen has also left open the option for EU renegotiation but on terms that other member states would find hard to accept. Within six months she would want to turn the bloc into a loose cooperative of countries without the euro, a border-free area, budget rules or the pre-eminence of EU law.
Given such demands, markets sense Le Pen holds a much deeper ideological hostility to the EU than Melenchon, whose principal objection is to the bloc's insistence on austerity policies - a view shared by many more centrist voters.
"Melenchon's 'plan B' would be getting out of the EU and maybe out of the euro zone. That's more or less 'plan A' for Le Pen," said Florian Hense, European economist at Berenberg Bank in London. "Le Pen would still be the more nuclear option."
While Le Pen has led the polls or been a close second for months, most still put Melenchon in fourth place.
However, they also show Le Pen losing in the run-off whoever she faces, as many voters would rally behind her opponent simply to keep the far-right out of the presidency. Melenchon, by contrast, could beat Fillon as well as Le Pen, according to the few surveys that have mapped such a scenario.
Still, Hense puts only a 10 percent chance of either Le Pen or Melenchon becoming president. Many obstacles lie in their path, and even if elected they would have difficulty in securing a parliamentary majority to push through their programmes. Macron, a centrist independent, or the conservative Fillon would be clear favourites if they faced Le Pen in the second round.
Analysts at Morgan Stanley are even less convinced that Melenchon will make it all the way to the Elysee Palace. They attach around a 5 percent probability of his winning, compared with around 15 percent for Le Pen.
Strategists at Citi, however, believe the first round is so close to call that the French election now represents a "volcano" risk for markets, with the "nightmare" scenario being Le Pen facing Melenchon in the second round.
They argue that a victory for Le Pen or Melenchon in the run-off would be likely to trigger a slump of up to 10 percent in French and European equities by the end of June. By contrast, a win for either Macron or Fillon could propel markets up by as much as 20 percent by the end of the year.
"The politics of separation is the greatest risk for the euro," said Lena Komileva, managing director at G+ Economics. "That it is no longer just a Le Pen risk is a grave concern."
Societe Generale currency strategists said the risk of a run-off between the two anti-establishment candidates "is getting slightly less likely", noting Melenchon's poll ranking had failed to break above 20 percent despite the surge.
Analysts at Nomura noted his stance on the EU "looks less aggressive than Le Pen's".
Still, caveats must apply following Donald Trump's victory in the U.S. presidential election and Britons' vote to leave the EU, events which both caught markets off guard last year.
The Nomura analysts noted the combined chance of either Le Pen or Melenchon winning the first round is around 40 percent. That's higher than the probability assigned to both Trump and Brexit at a similar stage before those votes, they pointed out.
"A euro zone break-up would become increasingly likely if a core member were to leave. This would have significant ramifications for global financial markets. A 'risk rally' of the kind we saw after the Brexit vote is highly unlikely if Le Pen were to be elected," they said.
(Editing by Andrew Callus and David Stamp)