April 1, 2014

The French Implosion

Veronique de Rugy

Senior Research Fellow
Summary

While commentators remain captivated by the bleak saga of such Eurozone basket cases as Greece, Portugal, Spain, and Italy, another European Union member is quietly slipping into economic despair. After years of fiscal mismanagement, France is in a bad, bad place.

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This article appears in the April edition of Reason Magazine

While commentators remain captivated by the bleak saga of such Eurozone basket cases as Greece, Portugal, Spain, and Italy, another European Union member is quietly slipping into economic despair. After years of fiscal mismanagement, France is in a bad, bad place.

France spends more of its GDP on government-57 percent-than any other country in the Eurozone. The country's unemployment rate is at a 16-year high of 11 percent, and a startling number of richer and younger French people are leaving for more hospitable economic environments abroad.

It has gotten so bad that France's crisis-wracked neighbors might be catching up: A November 2013 Organization for Economic Co-operation and Development report warned that Paris is "falling behind southern European countries that have cut labor costs and become leaner and meaner."

The data is even more striking when compared to Germany. With an unemployment rate of 5 percent and a private savings rate of 12.1 percent, Germany has been growing at 1 percent annually while France sputters along at 0 percent.

It is tempting to blame this on the 2007 recession, but the reality is that France hasn't been doing well in years. Since the creation of the Eurozone in 1999, France has only managed a 0.8 percent annual growth rate. Germany, by contrast, has grown three times faster over those 15 years.

Across all available indexes of national economic freedom, France scores very poorly for a developed nation. The 2013 Economic Freedom of the World Index, published by the Fraser Institute and Cato Institute, aggregates and weighs national data on five broad categories-size of government, rule of law and property rights protection, sound money, freedom of international trade, and regulation. How does France rank? An unimpressive 40th, down from 25th in 1980.

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