- While the euro has not caused France’s economic problems, its politicians’ commitment to the single currency represents an insurmountable barrier to solving them.
- With the only effective solutions – full-blown eurozone political union, or abandoning the euro – ruled out, muddling through is all that is left. Another name for this approach is “transfer union,” which implies relentless economic austerity and declining living standards, because strong countries – first and foremost, Germany – are determined to limit their liability for bailing out deficit countries by making all transfers conditional on tough budget retrenchment.
- At the same time, financial markets are forcing fiscal retrenchment on governments, as will the planned new fiscal treaty (on which Germany, among others, insisted). Demand is therefore being drained out of the eurozone economies, with stronger external demand, stemming from the euro’s depreciation against other major currencies, unable to offset the effect on growth.
- France’s response to the tension between preserving the European project (equated with the single currency) and avoiding a chronically depressed economy will be to put off the day of reckoning for as long as possible. This dead-end strategy will feature vain attempts to game Germany and desperate economic expedients, such as the essentially coercive capture of domestic savings to finance government debt. But the day of reckoning will come, and France’s ruling establishment will be judged harshly when it does.
Junte-se a isso os potenciais problemas que estão a nascer: a Hungria, por exemplo.
(Atualização: editorial do The Economist, 31 março 2011
- France has enviable economic strengths: an educated and productive workforce, more big firms in the global Fortune 500 than any other European country, and strength in services and high-end manufacturing. However, the fundamentals are much grimmer. France has not balanced its books since 1974. Public debt stands at 90% of GDP and rising. Public spending, at 56% of GDP, gobbles up a bigger chunk of output than in any other euro-zone country—more even than in Sweden. The banks are undercapitalised. Unemployment is higher than at any time since the late 1990s and has not fallen below 7% in nearly 30 years, creating chronic joblessness in the crime-ridden banlieues that ring France’s big cities. Exports are stagnating while they roar ahead in Germany. France now has the euro zone’s largest current-account deficit in nominal terms. Perhaps France could live on credit before the financial crisis, when borrowing was easy. Not any more. Indeed, a sluggish and unreformed France might even find itself at the centre of the next euro crisis.
- France’s picnickers are about to be swamped by harsh reality, no matter who is president.
- The awkward truth is that France, the second-biggest economy in the euro zone after Germany, faces a public-finance squeeze.
- Today France continues to behave as if it enjoyed Sweden’s or Germany’s public finances, when in truth they are closer to those of Spain.
- This erosion of French competitiveness raises hard questions about the underlying social compact. Frenchmen cherish the notion that everyone has an equal right to decent services in good times and a generous safety net in bad. But what sort of level of support, in sickness, joblessness, infancy or old age, can France really afford to offer its citizens?
- Put simply, France is about to face the tough choices that Gerhard Schröder, Germany’s former chancellor, confronted in the early 2000s or that Sweden did in the mid-1990s, when its own unsustainable social system collapsed.
- The French live with this national contradiction—enjoying the wealth and jobs that global companies have brought, while denouncing the system that created them—because the governing elite and the media convince them that they are victims of global markets.
- The inconvenient truth is that whoever emerges the victor on May 6th will need to show a tough approach to the deficit, in the face of wary bond markets and possible recession.)