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France and the world

Just reading the daily Le Monde will warm your heart a bit this week. A front-page headline reads “France favoured by foreign investors”. Now, there's a piece of information that's going to give France some impetus.

France is now in second place in Europe, just behind the United Kingdom, which has experienced a considerable setback because of Brexit. Remarkably, the traditional businesses (agrifood, chemicals, equipment, etc.) are the ones back in favour, whilst the innovation sectors are exploding. And, Le Monde added, “Foreign investors are enjoying the quality of the labour market and Emmanuel Macron’s pro-business reforms, according to an EY expert. In addition, public assistance measures in terms of innovation have contributed to this appeal since 2009.” This led the Le Monde journalist to comment that “the Macron effect still persists amongst international investors. After his election as President of France, foreign direct investment projects unexpectedly accelerated. The following year, the momentum remained positive, but at a slower pace, according to the EY’s annual barometer published Tuesday 4 June. In contrast, at the European level, EY noted a historic drop of 4% in foreign investment in all 48 countries included in the study.” France became attractive once more, to a greater extent than Germany, which did not stop Brussels from pointing a finger at France. Today’s issue of Le Figaro had this to report: “The growth in public debt, which will peak at 98.9% this year, is particularly troubling for the European Commission. Having just exited from fiscal reform school, France is flirting with the red line. Although it got out of the excessive deficit procedure last year, it has already stopped satisfying the European Commission.  Of course, in 2018, Paris followed the rules set by the European countries and which Brussels is responsible for enforcing. “For France, our report concluded that the two criteria, the deficit and debt, were in compliance”, explained the European Commissioner for Economic Affaires, Pierre Moscovici, at a press conference in Brussels.

But France is not making as much effort this year, lamented the Commission. According to the European rules, Paris should still reduce its structural deficit (which doesn't depend on the current healthy growth) by 0.5 point of GDP ‒ a major effort that it is far from delivering. And for good reason: public spending is galloping away, and the experts at the Elysée are already doing some serious thinking about the 2020 budget to identify sources of savings.  Consequently, this is a pivotal year, an awkward stage to manage when the growth forecasts are weaker than projected. France and the World: a crucial face-off in the months ahead.

Christian Moguérou



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