France’s dour political and economic climate puts European economic progress in doubt. Highest unemployment in 16 years and the worst Presidential polling approval in French history contribute to a worrying outlook for the eurozone.
It is a frenetic time for European officials – politically, economically and diplomatically. When you think of the major issues facing Europe at the moment, your mind is likely drawn to the incessant financial and political turmoil embroiling Greece. Or perhaps you think of Italy’s economic and governmental troubles. If you are of a more political mindset, you might think of the quarrels between conventional and nationalistic political parties at the European Union in Brussels or the further solidification of Angela Merkel’s power base in Berlin. However, there is one very large and important player that has not frequently grabbed the headlines until very recently. France has troubles of its own.
As the second-largest economy in the euro zone, the French economy is a heavy factor in determining the health of the European economy at large. This fact does not bode well for the rest of the continent. In short, the French economy, rather than booming or imploding, is in the midst of a general and prolonged languor. The overall mood in Paris is pessimistic, as chronic, total unemployment reached a 16-year high of 11% in the third quarter of 2013, with the month of September seeing a 1.9% increase in the unemployment rate. In other words, September saw 60,000 people added to the 3.3 million people in France, who are out of work.
These figures are not a good sign for the European market, primarily because France makes up such a large percentage of the region’s economy. The economic and fiscal failings of a single relatively small euro zone state (read Greece or Ireland among others) can cause bad publicity, shake confidence in the currency and negatively affect its value. But such economic issues on a larger scale, in a state like France, have a far-reaching impact on the stability of the entire common market area.
The general mood of the population with respect to the economy is an important indicator of both present conditions and the future direction of the economy. Although the French economy has not exhibited the extremes of some of Europe’s “bailout economies,” its recent unemployment figures and the government’s perceived poor handling of the situation do little to boost popular morale.
As goes the economy, so goes the popularity of political leaders. President François Hollande, a member of the left-wing Parti Socialiste, has earned the unfortunate distinction of becoming the most unpopular president in the history of the country. In late October the French polling firm BVA recorded President Hollande’s popularity at a record low of 26%, marking the first time that a French president’s popularity rating has fallen below 30%. The public view of him has deteriorated to the point that four out of five French people believe that he will not be re-elected and only 16% of citizens claiming confidence in Hollande’s electoral success in 2017.
This public dissatisfaction arises largely from the president’s uninspiring handling of the economic crisis. The economic recovery policy is based on levying additional taxes to stabilize public spending issues, the most notable being an unusually high 75% tax on incomes above €1 million, which has caused many entrepreneurs and businesses to relocate operations outside the country. His position deteriorated further when public outrage at taxes on personal savings and a proposed “ecotax” forced him to retreat from the tax schemes altogether.
The public impression that he has taken a submissive role in European-level politics, particularly in relation to Germany’s popular chancellor, Angela Merkel, have also served to harm the French president’s relationship with his constituents. A dreary economy is bad enough, but when a population feels that it is in incapable hands, the outlook of the population becomes even worse.
There are some bright spots on the economic landscape of Europe. Germany is the example that most quickly springs to mind – one indicator is that the unemployment rate has remained stable at a relatively low seasonally adjusted 6.9%. Overall, though, the French economic malaise has attracted more attention as of late and more disquiet from observers and politicians in the region. There is little risk of a French economic and fiscal collapse on par with the situations in Portugal and Greece. But France can be seen as an indicator of economic progress, and the world should keep an eye on developments there.