France has slowly become Europe’s new economic locomotive. France survived the corona pandemic faster than neighboring countries and the gross domestic product is now higher than before the pandemic.
– Economic growth is faster in France than in other large euro countries. The United States is certainly doing much better, but compared to Germany, for example, France is doing very well, says the French economist Eric Heyer.
The German economy shrank by 0.3 percent in April–June this year, while the French economy grew by 0.5 percent in the same period.
– What is particularly interesting is that, although economic growth is modest, new jobs are suddenly being created in France at a rapid pace. The situation is in some places better than at any time since the 1980s, says Heyer.
Heyer is a well-known economist who specializes in the study of macroeconomic cycles. He works at the Sciences Po University in Paris and is the director of OFCE, a research institute specializing in preparing economic forecasts.
France is less dependent on China and Russia than Germany
At the same time, Europe’s leading economic power has run into serious difficulties due to the war in Ukraine and the fluctuations of the world economy.
– Germany must reform, but it will take time. Their export-driven economic model, based on cheap imported energy and low defense costs, simply does not work anymore, says Heyer.
France has survived the crises of recent years clearly better. The country produces a large part of its electricity with nuclear power, which is why the effects of the Russian energy crisis have remained more moderate.
France is the largest nuclear power producer in Europe. Some of France’s nuclear reactors were out of use at the start of the war, but they have now been serviced.
– Above all, however, our dependence on China is much less than Germany. The weakening of China and the global economy will therefore not affect France as drastically, says Heyer.
President of France Emmanuel Macron has been talking for a long time about how France and Europe should reduce their dependence on China. On the other hand, France has not refused Chinese money, but is actively trying to attract, for example, Chinese electric car manufacturers to open their factories on French soil.
France relies on domestic demand and equalizing income differences
The economist reminds that France’s economic growth does not depend on the export industry like Germany’s. The goal of France’s economic policy is to balance the country’s deficit trade balance and at the same time increase domestic demand, so that the country’s economic growth does not become too dependent on the export industry.
– This is a significant difference to Germany, which is dependent on foreign trade, and which strives by all means to maintain a 6-8 percent surplus in its trade balance. French economic growth depends on domestic demand, while Germany’s economy is driven by exports, Heyer describes the French model.
France has long invested in supporting domestic consumption. Efforts have been made to take care of the purchasing power of low- and middle-income households in particular.
– Thanks to taxation and income transfers, income differences here are significantly smaller than elsewhere in Europe. Public services, which in France are mainly aimed at lower-income households, even out income differences even more, says Heyer.
– Domestic demand therefore benefits from economic policy that aims to reduce income differences, the economist sums up.
The unpopular Macron has attracted investment to France
France has attracted a lot of foreign investment in recent years. One of the reasons for that is the very pro-business policy of President Emmanuel Macron, who is sitting in his second term.
Among other things, Macron has invested in growth companies and reduced corporate taxation. The labor law reforms he pushed have made it easier to hire and fire employees.
On the other hand, there has been enough dissatisfaction and large demonstrations in France. This year, the major pension reform pushed by Macron came into force, raising the retirement age to 64 – and it brought the French to the streets.
According to the economist, it is still too early to assess the economic benefits of the pension reform.
– If people are forced to continue working without addressing the problems of working life, it is not necessarily particularly productive. However, Macron has managed to show Brussels that France is capable of reform, says Heyer.
The rise in prices worries ordinary French people
There is still a lot of mistrust smoldering under the surface and the sharp rise in prices is making everyday life difficult for ordinary French people.
– Everything is still more expensive: rent in Paris, electricity, fuel, food and even clothes. Everyday life is difficult, and the government hasn’t exactly succeeded in making it easier, says the Parisian Jennifer Longchamps.
Maryse Roux -a pensioner lady agrees.
– I now pay 50 euros for a week’s worth of vegetables at the market, while I used to spend 35 euros on them. Many low-income pensioners have to buy discount products when the store closes, he says.
The fine growth of the French economy is also hardly visible in the everyday life of the middle class.
– The government does talk about good employment, but at the same time, public services such as schools and hospitals are closed. It seems contradictory, says pensioner Mrs. Roux.
Europe’s largest economy in 2050?
In any case, the goals are high in France. French Minister of Economy Bruno Le Maire has said that the country’s goal is to become Europe’s largest economy by 2050.
Economist Heyer praises the minister’s speeches.
– For now, Germany is such a much bigger economy than France that we won’t be able to close the gap in ten or even twenty years. Germany is in trouble now, but will rise again.
France’s good economic development will in any case increase its influence in the European Union.
– The dynamics are now on France’s side and 2050 is such a long time that anything can happen.