What is wrong in France?

- "The reasons why we are concerned about the French economy, looking beyond short-term developments, are structural:
• although its price-competitiveness and expenditure on Research & Development are similar to Germany’s, France’s export performance (market shares, size of exports to countries enjoying rapid growth, trade balance) is bad;
• French companies suffer from poor profitability (apart from major listed groups) and this is going to lead them to slow down either employment, or investment, or wages;
• the size of French industry is now very small in comparison with other European countries, with factory jobs replaced by jobs in unsophisticated services, and this hampers productivity gains and, in theory, the average level of wages;
• the level of the tax burden and the structure of taxation clearly give an incentive to offshoring."
- "However, in the French case, there are a few favourable factors: household indebtedness is quite small and default rates are low; large groups are very efficient; the residential real estate market remains relatively healthy; banks are not struggling, demographics is more favourable to growth than in other European countries. In reality we can see above all, until now, the difference between the objectives of French and German economic policy. In France, priority is given to driving wages and consumption up as much as possible; in Germany, preference is given to keeping a large-scale exporting industry."

Natixis Flash Economics 445 20100909

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