Economic Crisis Deepens in France


There are not many viable options for the recovery of Europe, so the pressure is now on France to join the Germans in repairing the damage to the European economy. But, by the looks of the most recent data, that is not something imminent.

The first quarter numbers for France are dismal, perhaps not quite as bad as many first thought likely, but nothing to suggest that France is going to be able to play a major role in the recovery anytime soon. The growth in the first quarter was just 0.1%, a hair above recession. The measures of business and consumer confidence are as low as they have been since the recession started in 2009, and the population has become utterly frustrated and disillusioned with the government of Francois Hollande. The slow growth has coincided with a serious scandal that has been undermining the reputation of a government that sought to set itself above the opposition.

There is no movement within the ranks of the consumer, as spending has diminished to nothing. The French economy is as dependent on the levels of internal consumption as the U.S. This is not a country that thrives on the export sector, as the Germans do. French business has long struggled to compete effectively on the global stage, and that has increased the reliance on the French household over the years. Right now, that household is in retreat on all fronts. There has been a dramatic reduction in the sales of new cars, appliances, clothing and even food.

Solutions to the crisis in France are hard to come by, as neither of the dominant parties perceivably have much to offer. Analysts look at France as too dependent on the internal market, but there is no easy way to make the country globally competitive. To export more effectively, the French would need to lower the cost of doing business, and that means radical labor reforms and regulatory changes that would not be popular in the country. French manufacturers have yet to embrace the world of technology, also limiting their export potential as well. The recovery of the domestic market is all about confidence-building, but this is at a low point for all. Reversing that malaise will require dynamic leadership and few expect to see anything like that from a scandal-ridden French leadership.

-Armada Corporate Intelligence



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