Even with mounting debt problems in mostly southern members of the European Union, just one year ago many would have scoffed at predictions of a French recession. After all, other than Germany, it was considered a proverbial alpha dog in the EU. Fast-forward to present day and the word recession has become less of a prediction and more of a foregone conclusion.
The Bank of France noted this week that the nation is all but assured to slip into recession within the next quarter. To blame, from the central bank’s perspective, is the lack of demand for French-made products out of its trade partners, notably the key duo of Spain and Italy, whose economic struggles are well documented. Still, French prognosticators are saying it should only be a slight recessesion in what carries a similar tone to widespread predictions of the United States having a “soft landing” at the end of the last economic boom circa 2008 (That, obviously, didn’t work out so positively.)
In any case, the implications are pretty significant given new leadership’s pledge to reduce the budget deficit by 4.5% of GDP this year.
“With an economy in recession there is no way to meet that target without another series of deep cuts in spending or big tax hikes. The unions are threatening a nationwide shutdown if more cuts are proposed and that leaves taxes. And industrial production is at levels not seen since the depths of the 2009 decline,” said Chris Kuehl, NAMC economist. “The fact is that France is in real economic distress and there are not many options available at this point.”
France’s difficult situation was bandied about quite a bit during NACM’s Credit Congress event in Texas nearly two months ago. One French-born attendee noted that, like many U.S. voters with partisan politics there, French citizens came to be quite cynical of the incoming or outgoing leaderships’ promises amid weakening conditions in virtually all the nations nearby that are linked by the common currency.
“A lot of it is rhetoric and has nothing to do with reality,” the Credit Congress delegate and FCIB member noted. “Most people voted against someone, not for someone or something.”
-Brian Shappell, CBA, NACM staff writer