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Electoral silence on France's slow economic decline

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  • Electoral silence on France's slow economic decline

    http://www.telegraph.co.uk/finance/c...c-decline.html

    Electoral silence on France's slow economic decline
    France's economy has weathered the global crisis of the last five years deceptively well, shielded by a Leviathan state and the postponement of hard choices.

    A man wearing a T-shirt reading 'Revolution' takes part in a march as part of the annual May Day workers' events on May 1 in Lille Photo: AFP
    Ambrose Evans-Pritchard

    By Ambrose Evans-Pritchard, in Paris

    7:35PM BST 01 May 2012

    CommentsComments

    Yet the underlying decline that began 30 years ago has gathered speed. France's share of eurozone exports has dropped from 17pc to 13pc since 2000. Spain, Benelux and Germany have done much better.

    "France is coddled with illusions," said Jean Peyrelevade, ex-head of Credit Lyonnais. "Economic decline is the brutal, hard, undeniable reality. We are consuming the leftovers of a past prosperity."

    The trade account - an iconic indicator for Colbertistes - has switched from a surplus of 2.5pc of GDP in 1999 to a deficit of 2.4pc today. "Since 2005, export growth has fallen significantly below the euro area average," said the International Monetary Fund.

    "Current account balances continue to deteriorate, raising concerns about the competitiveness of French exports. These contain a large share of low to medium-tech products that face competition from emerging economies," it said.

    Top French companies such as LVMH, L'Oreal or Danone are global giants, and Airbus is no straggler. There are 36 in the world's Fortune 500, compared with 35 for Germany and 30 for Britain. Yet few are in pioneer fields.

    Industry has been losing 60,000 jobs a year for a decade. Manufacturing has shrunk to 12pc of GDP, the same as Britain - a country deemed to have "no industry" by President Nicolas Sarkozy.

    Such matters have hardly intruded on the elections. Mr Sarkozy and Socialist challenger Francois Hollande both aim to cut the budget deficit toward balance by the mid-decade, but neither is remotely close to embracing the sort of shock therapy that Germany went through nine years ago (the Hartz IV reforms) or that Italy, Spain and Greece face now.

    There has been no attempt to prepare the French people for what lies in store. Marion Laboure from Barclays Capital said the next government will have to "build credibility nearly from scratch".

    The IMF said the state's share of GDP reached 56.8pc of in 2010 and will still be 55.2pc this year. This is higher than in Scandinavia, but spent very differently and without Nordic labour flexibility.

    Mr Hollande plans to hire 60,000 new teachers. He will narrow the deficit by raising taxes, not by cuts. The unreformed French state will grow even larger. Mr Sarkozy is barely more restrained.

    "The size of the French government is 20pc of GDP too high. It is a brake on growth and lies at the root of our national decline," said Professor Francois Facchini from the Sorbonne. "We like to think France is a special case, but we're not."

    The IMF said France has one of the rich world's highest life expectancies but one of the earliest retirement ages, a costly mix. Just 39.7pc of those aged 55 to 64 are working, compared with 56.7pc in the UK and 57.7pc in Germany. "French workers spend the longest time in retirement among advanced countries," it said. Pre-retirement benefits are the culprit.

    The Fund said professional services have become "more regulated" not less over the past decade. France's "tax wedge" - or tax as a share of labour costs - is among the world's highest near 50pc. France has raised job protection over the past 20 years, while Germany, Holland and Belgium have cut back.

    The minimum wage (€9 an hour) is 0.6pc of the median wage, much higher than most OECD states. The result - apart from flattering French productivity levels - is an entry barrier for youths and chronic long-term unemployment. "These rigidities have led to loss of efficiency, inability to make a breakthrough in new markets and loss of technological edge," it said.

    Mr Hollande's answer is to raise the level further. Mr Sarkozy's team told the IMF that it agreed with many criticisms but "cautioned that the political environment is not always conducive".

    It is this unwillingness to grasp the nettle that led Standard & Poor's to strip France of its AAA rating, rather than the debt level alone, which could reach 100pc of GDP quickly if growth sputters in 2012 and 2013.

    The rating agency also blamed Europe for insisting on the "self-defeating" strategy of austerity alone. The candidates have seized on this part of the equation, calling for monetary stimulus from the European Central Bank. Yet they skip over the quid pro quo: that they must follow Latin peers in delivering micro-reforms before the ECB will ride to the rescue.

    It may take a full-blown crisis to wake France from its comfortable reverie. The country has the best aging profile of any big EU state. If demographics are destiny, it will overtake Germany in a few decades to become Europe's dominant power. Getting there is the problem.

  • #2
    Re: Electoral silence on France's slow economic decline

    Originally posted by globaleconomicollaps View Post
    Such matters have hardly intruded on the elections. Mr Sarkozy and Socialist challenger Francois Hollande both aim to cut the budget deficit toward balance by the mid-decade, but neither is remotely close to embracing the sort of shock therapy that Germany went through nine years ago (the Hartz IV reforms) or that Italy, Spain and Greece face now.
    Hartz IV (along with Hartz's accompanying scandals) also destroyed the long-standing German political order by killing the SPD (Social Democrats). Schroeder killed the party. Post war was always about Social Democrats and Christian Democrats. Now there's nothing but Merkel (CDU), a fractured left, and more extreme parties.

    It was party-wide political suicide on an unprecedented scale. No doubt both Sarkozy and Hollande are aware of this.

    If demographics are destiny, it will overtake Germany in a few decades to become Europe's dominant power.
    No, it won't.

    France, unlike Germany, has overseas territories that belong to her. Anglos don't often think of France as this:





    If one looks at Metropolitan France (the part located in Europe), one finds demographic projections that, even on their high-end estimates, don't have France approaching Germany's population even in 2060. It's still by far (90 something percent) the largest chunk of the French population. And Germany is presently losing 0.2% population. But the point at which they meet, if ever, is probably a century off.



    Last edited by dcarrigg; May 01, 2012, 05:45 PM.

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    • #3
      Re: Electoral silence on France's slow economic decline

      France, unlike Germany, has overseas territories that belong to her. Anglos don't often think of France as this:
      Unless you love to cruise and then you begin to realize France is not just in Europe!

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