Europe’s economy: why am I worried by France?

Europe’s economy: I am worried by France and this is why!

I am not going to be long! Few weeks ago I wanted to do an article on France and its economy. As a national of a country of the Franc zone, the fate of the euro is my concern, given the fixed parity system which exists between the two areas. The Eurozone with a contraction of – 0.2% is so bad that a growth of 0% in France and 0.2% for the quarter in Germany have been hailed as “good news”. In the case of the France a contraction of 0.1% of the economy was even expected.

In this article, however I am reviewing the economy of our “ancestors the Gaulois”, since France is “legal guardian” of the CFA in the euro area. The country has a new Socialist president but after the euphoria, let’s return to serious things, among many of the country’s economy. I went through the latest statistics of the second great nation of the euro after the Germany, my conclusion is this: I am worried about France economy!

Economic growth at 0% flat ground!

“0” appears to be a well French figure! Between the first quarter of the year 2011 and his second, GDP has been stagnant at 0%. On the other hand between the third (Q3) and the second quarter (Q2) growth is past to 0.3%.

From the last quarter (Q4) of the year 2011, our “ancestors” economy remained stagnant at 0%. The INSEE report gives us the reasons for this block. ” In the second quarter of 2012, as in the first quarter, real GDP ** remained stable (0.0%).”.Household consumption expenditure contracted slightly (0.2% after + 0.2%), while the gross capital fixed formation (GFCF) total grows again (+ 0.6%) after a downturn in the first quarter (–0. 8%). Total final domestic demand (out of stock) contributes weakly to the evolution of the GDP: + 0.1 point in the second quarter, after a neutral contribution in the previous quarter. Imports accelerated significantly (+ 1.8% (+ 0.6%), while exports remain low dynamic (+ 0.2% after + 0.1%). Accordingly, the external balance contributes new negatively to the evolution of the GDP (–0. 5 point, after –0, 1 point). Changes in stocks of companies positively contribute to the evolution of the activity: + 0.3 point after + 0.1 point in the first quarter of 2012.

From these results can be concluded that the problems of the euro are strangely affecting France’s exports. In normal times, the euro to such a low level would rejoice the heart of French exporters. The lack of confidence on the outcome of the crisis of the euro, however indirectly affects the external orders of goods (exports of the country). The increase in fixed investment is in my opinion limited “la catastrophe” by avoiding the GDP to slide in the negative area.

The thorny problem of unemployment

The rate of unemployment in France is one of the highest among the major countries of the euro. It is 10.2% almost double that of the 5.2% Germany. Most disturbing is that this rate did increase to Avril2011 (9.6%) was April 2012 (10.2%). You would not believe me if I give you the France young unemployment! It is 22.2% or twice that of the national unemployment rate. Decidedly one could conclude that France young unemployment rate has reached alarming proportions. François Hollande should implement a young employment policy to eliminate the inactivity of this part of the population. Emphasis should be put on the link between the labor market and the vocational- academic training.

The capital flight

The debt of the Bank of France to the other central banks of the euro area has increased from 7.6 trillion in 96.3billions of July 2011 to February 2012. This represents an increase of 88.9 billion. This increase in debt to the Bank of France represents the transfer of funds between the France and the other Member of the euro countries. Guess where these funds have landed? Not in Africa! In German and Dutch banks. This huge capital flight reflects the financial markets discomfort with the France. It is surprising that the second great nation of the euro began to bring less confidence to the markets. In one of my articles published in the monthly financial “Les Afriques” I have said that the problem of the France is the Italy. 55% Of Italian private debt are held by French banks. When therefore Italy is under the light it reveals the shadow of the France!

The bottom table traces border transactions between the France and the rest of the countries of the euro. Well before December 2010, the volume of domestic transactions was higher than cross border transactions.

From February 2011, cross border transactions outperformed domestic transactions, reflecting a certain financial insecurity. The stagnant growth in the second quarter may accelerate this bleeding of capital in quest of good auspices.

The decline in economic growth in the rate of unemployment and an increasing financial insecurity put France in a very uncomfortable situation. We are in middle of the year, and the freshly ruling Socialists must be able to give a boost to this economy that is trying to distance itself from the fate of its neighbors, the Mediterranean Club (the Italy-Spain-Portugal and Greece).

** Picture from the Province (France)

Francis Konan

Advisor editorial Les Afriques,

A graduate of the University of economy and management of Vienna (Austria), graduated from the Institute of advanced studies in Vienna (Austria), a graduate of the Faculty of Economics & Management of Abidjan.


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