Is the French economy in trouble?

in busy •  6 months ago

Today Eurostat issued a bunch of statistics about how the eurozone economies performed in Q2 2018 (April - June 2018).

France was the standout for disappointment. Growth in the second quarter was just 0.2%, similar to the first quarter. And inflation accelerated to 2.6% in July.

That means that France has higher inflation and lower growth than Brexit Britain, which has just 8 months to go to Brexit Day and no deal in sight. France's unemployment rate is stubbornly above 9%, while Brexit Britain's is 4.1%, a 40-year low.

So what is going on in France? Part of it is down to strikes in protest at President Macron's reforms. Strikes amongst air traffic controllers are up 300% compared to 2017, and it is starting to impact neighbouring countries that depend on tourists who fly over French airspace. According to the French senate, France alone was responsible for 33% of flight delays in Europe. French railways are also on strike.

Meanwhile gloomy French consumers have shut their wallets.

The problem is that President Macron got elected simply because he wasn't Marine Le Pen, rather than because there was broad support for his policies. In the first round of the French Presidential elections he got just 24% of the vote.

That is in strong contrast with Margaret Thatcher, who pulled in 43.9% of the vote in 1979, and never dropped below 42% in the 1983 and 1987 general elections. She had a genuine popular mandate and her voters backed her to the hilt as she reformed the UK.

Add to that Macron's personal extravagance (spending 500,000 euros of tax money on a new dinner service) and voters are not inclined to give him the benefit of the doubt. Maggie by contrast understood that if she was preaching thrift to the voters, she had to play the part too. While she lived in Downing Street, she put up with a kitchen that hadn't been updated since the 1950's and cooked her own dinner at night by reheating frozen food.

If things continue as they are, Macron will lose the next election - and who knows what that means for France. They've already rejected the traditional centre-right and centre-left parties. If Macron's new En Marche movement fails as well, Le Pen and her cronies will make hay.

Ultimately France will not regain competitiveness until it leaves the euro - but no French politician is brave enough to propose that.

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