France’s economic crisis threatens the cohesion of the EU
Since June, the restaurant “La Belle Etappe” in Brignoles in southern France has been offering a new multi-course meal: the menu crise. Anyone contending that the people of France take no notice of their country’s economic troubles is very wrong. Preferably dealing with crises by digesting them in an agreeable manner is the very image that Germans have of the French. And indeed, in the Provencal countryside – and not only there – all the talk from Brussels about austerity with no alternatives is, at best, making for plenty of animated table talk. There is apparently no stomach for turning over a new leaf for La Grande Nation by swallowing a package of painful belt-tightening. And why should there, asks the prominent French philosopher Emmanuel Todd, if the negative effects of French extravagance are far more agreeable than those of German efficiency? Perhaps if the Germans learned to be less efficient, they might enjoy life a bit more …
Still the world’s no. 5 national economy
If only France were a country of the economic significance of Luxembourg, one might be excused for smirking at this attitude. France, however, is the world’s number 5 national economy, one of its strongest exporters and home to some of the biggest corporations on earth. The CAC 40 share index is packed with global players in many economic sectors. Most importantly, however, France is an anchor for the EU. The European Union would simply not be viable without its economic clout and political stability. If, as a consequence of the country’s problems, the Front National someday takes the reins of government, the E
U’s death knell would begin sounding.
France’s biggest employers’ associations have declared their “deep concern for the future of our country. It has become apparent that the government does not follow up its words with action.” Yet there is general consensus regarding the character of France’s economic difficulties. On the one hand there is the bloated state. France has 90 civil servants for every thousand inhabitants. In Germany that figure is 60. Public sector spending totals 57 % of GDP, the highest in the Eurozone. In Germany those expenditures are 45 % of GDP. The French budget has a sustainability gap of over 3.5 %, well above the EU’s 3.1 % average. The French tax burden is the EU’s second highest. In the Eurozone only Belgium has a tax burden comparable to France’s, at 46.7 % of GDP. More sobering facts: France’s overall debt totals nearly 100 % of GDP. The French share of global exports adds up to just 3.1 % – Germany’s is nearly three times higher. And finally the country’s global competitiveness rating has slipped from 12th to 23rd place.
Unemployment and a lack of competitiveness are two more troubles in the French hexagon. More than 3.3 million people in France, well over ten percent, are jobless. A 35-hour workweek, the SMIC gross minimum wage of 9.53 euros per hour, a retirement age of 62 and uncommonly dense state regulation of the labor market and social welfare are all hobbling the French economy.
Don’t write France off
Perhaps even more striking are comparisons of annual effective working times. While workers in Germany spent an average of 1,904 hours on the job, the French spend an average of six weeks fewer, or 1,697 hours total, in the same time. That puts them second to last in he EU, just ahead of Finland. And notably, it was during the stewardship of the conservative presidents Jacques Chirac and Nicolas Sarkozy that working hours were cut the most. Perhaps both men took to heart a book by their compatriot Paul Lafargue. His work The Right to Be Lazy raised a furor in the late 19th century, possibly also because he married the daughter of a certain Karl Marx.
What’s more, France is losing its industrial base, with small and midsized companies being pushed into a marginal existence. The economy has been recovering very sluggishly from the stagnation phase that began in 2012. Hardly surprising, taking a glance at some startling statistics: In no other country of the EU has the producing economy lost as much significance in the past decade as in France. French industry’s share in gross value creation currently amounts to just 10 %; in Germany the figure is 23 %. That’s far less than even in Germany’s structurally weak eastern region and only just above the level of Greece. Per capita industrial output (measured in purchasing power parities) is higher in practically every eastern European country than in France. In the homeland of mercantilism, the economic engine of industrial exports is being strangled. All that must be laid at the feet of François Hollande, but even more so his predecessors in office.
Just hope for better days
Given this crush of vexing problems the country appears to be slipping into a baleful mix of lethargy and helplessness. First the idea of a state-steered economy experiences a renaissance, then massive schemes to jump-start the labor market pop up (the 30-billion-euro “pact for responsibility”) and then the state intervenes in takeover battles (e.g. Alstom and Peugeot) to keep at least a remnant of industrial production inside the country. Meanwhile the search is on for partnerships for new, growth-oriented policies within the Eurozone, or people just sit back and hope for better days. A clear approach or resolute action imposing unpopular measures is nowhere to be seen.
Foreigners living in France experience the country’s problems and sometimes absurd contradictions especially clearly. Anyone requiring medical attention generally encounters highly qualified physicians. Practices are overflowing; waiting times seemingly endless due to oft grotesque organization procedures. When one needs a painkilling injection an infirmiere makes a house call. Medications can be had at rock-bottom prices. Customers often leave pharmacies with shopping bags full of pills, ointments and essences.
Anyone in need of a repairman faces a journey through hell. There’s no chance of arranging a proper appointment, workers come and go as they wish, depending on the humidity and current availability of leisure activities. They drag individual jobs into eternity – to their own disadvantage – provide mediocre quality yet demand astronomical fees. Construction costs easily reach 3,500 euros per square meter. Foreigners looking to build often form collectives and have qualified crews flown in from Germany and even the UK. Some joke that Berlin’s blighted airport construction project is actually in the hand of a French construction mafia.
Pillar of global economy
Despite it all, France is (still) a pillar of the global economy. In the aviation, energy, pharmaceutical, chemicals and electronics sectors French corporations are among the world’s best. In luxury items, for many there is no alternative. In many industrial centers the country’s infrastructure is outstanding. France has excellent roads and its high-speed railroad network is the biggest in Europe. With a birthrate of 1.99, the country’s demographic trend is comparatively stable. Family policy in France has created a good foundation for reconciling work and family. About 80 % of all mothers with two children also hold a paying job. Environmental protection has been enshrined at the constitutional level since 2005.
Despite all the country’s contradictions and absurdities it would therefore be premature to write France off. That’s if Paris manages to get its budget under control, bolster its industrial base and nurture innovation, and the government musters the courage to tell the people the truth over unavoidable hardships and pass the same, a severe crisis can still be avoided. Ultimately, it will be up to the French people themselves, to accept tough times before improvement comes, to overcome the crisis. If they fail, the fallout would be economically and politically explosive. It would be felt in all of Europe.