By Allan Barber
I love France and all things French, so it was with a degree of sadness that I read an article in Britain’s Daily Telegraph about how badly the French economy is performing.
This is not just the result of Francois Hollande’s presidency, nor even the alarming behaviour of his partner Valerie Trierweiler who has been called an ‘unpinned grenade’ and ‘nothing but trouble’ by her boss at Paris Match.
The decline has been happening for more than 20 years; most tellingly France’s share of global exports has fallen to 3% compared with 6.3% in 1990, while the trade balance has switched from a surplus of 2.5% to a deficit of 2.4% over the last 12 years.
The public sector now costs 56% of GDP, higher even than Denmark, because of early retirement, welfare costs, high wages and short working hours.
Only 40% of people aged 55-64 are in work as against 57.7% in Germany.
French business is totally at odds with President Hollande’s failure to address the seriousness of the issues facing the country and, now, the IMF has said that over taxation is undermining France as a place to work and invest and destroying its competitiveness.
Ironically IMF President, Christine Lagarde, may well be a future presidential challenger to M. Hollande.
The IMF is warning the French government that, unless changes happen urgently, France risks falling behind Italy and Spain, two European Community members generally believed to be in serious trouble and, in the case of Spain, even a basket case.
One Gaullist deputy has said that France must leave the Eurozone and devalue by 30% against the German Mark. This is doubtless something which is most unlikely to occur, especially if we look at the measures being taken to keep Greece in the European Monetary Union, but it is an indication of just how bad things have become.
The President has said he will announce ‘tough decisions’ when he announces his reform package next Tuesday, but business leaders have suggested the market will decide regardless, unless his tough decisions are really seen as sufficient to solve the crisis.