Why France Is in Trouble with Its Economy?

Topics: Inflation, Unemployment, Employment Pages: 3 (608 words) Published: August 31, 2013
Why France is in Trouble with Its Economy?

Economy of France
Items Rank GDP Statistics 5th (nominal) Nominal : $2,609 trillion USD GDP growth rate -0.2% (Q1 2013) GDP per capita Nominal : $41,141 USD (2012,18th) Inflation rate 2.3%(June 2013) Unemployment rate 11.0%(June 2013) Gov’t debt $2,486 billion USD Gov’t debt to GDP ratio 91.2%(2013Q1)

GDP Comparison

Source: Eurostat

Unemployment Comparison

Inflation Comparison

What’s wrong with France?
Govt’s spending
 What is the problem? 15 years ago public spending as a proportion of GDP was at similar levels in France and Germany. Now France’s public spending, at almost 57% of GDP, is almost 10 points more than Germany’s .  Why is the problem? Burdensome welfare measures for old & retired people. The size of the French public sector has become a deadweight dragging down growth. Lack of monetary policy as a tool.

Unemployment
 What is the problem? In the past 20 years, Unemployment rate of France has fallen below 8%. Now France’s unemployment rate is over 10% and rising, especially for the young people. The very low employment rates at both age extremes: the employment rate of people aged 15– 24 and 55–64 years old Employment rates, 2013 Q3 Youth(15-24)

France USA 28.5 45.6

Prime age(28-54)
80.8 75.8

Older(55-64)
44.7 60.6

Unemployment
 Why is the problem?
For the young French not to work: the high minimum wages which prevent low productivity workers from easily entering the labour market, ineffective university curricula that fail to prepare students adequately skills for the labour market. For the senior French not to work: Policies that made early retirement financially attractive. Restrictive legislation on work and incentives for premature retirement also contribute. Regulation: French laws that protect full-time workers have the effect of trapping highly educated youth into temporary and informal employment, because of the difficulty and expense of...
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