France is facing a number of economic and political challenges. The author summarizes the current conditions, providing historical context and assessing the government’s potential to avert an economic crisis.
To assess whether current reforms will be sufficient to prevent the looming economic crisis, the author provides a useful summary of the political and economic environments in France.
How Is This Article Useful to Practitioners?
The author highlights both the positive and negative aspects of France’s economy, in addition to providing context behind the political reforms.
France is the fifth-largest economy in the world and the sixth-largest exporter. It is home to numerous large multinational and Fortune 500 companies and is envied for its high standards of infrastructure, education, and health, as well as its high overall standard of living.
But entrepreneurship in France is being stifled because most markets are heavily regulated and hampered by very powerful trade union control and growing social tensions. Public debt is already more than 90% of GDP and is still increasing, and France’s sovereign debt rating was downgraded from AAA in January 2012. Furthermore, unemployment has recently risen more than 10%. These are all warning signs for investors to proceed with caution, if at all.
François Hollande, France’s current president, is aiming to cut the budget deficit to 3% of GDP for 2013 and to reach a balanced budget in 2017. Although he has made some progress in this direction, the author suggests that he could easily run out of time.
The article serves as a reminder of the issues that EU members are facing and the constraints that have been placed on the independent policies available to them as they attempt to improve economic growth within a shared monetary framework. Despite these challenges, as well as those created by various social tensions, there appear to be a few positive aspects to the current political administration in France. The question remaining is whether time is on France’s side.