First things first: France has problems. Unemployment is high, especially among young people; many small businesses are struggling; the population is aging (although not nearly as much as it is in many other countries, Germany very much included.) By just about any measure I can find, however, France looks not too bad by European standards. Gross domestic product has recovered roughly to precrisis levels; the budget deficit is fairly small and the medium-term debt outlook not at all scary; the long-term budget outlook is actually pretty good compared to France’s neighbors, thanks to a higher birth rate.
Yet the country is the subject of vituperative, over-the-top commentary. Last year The Economist was declaring that France was “the time bomb at the heart of Europe.” Earlier this year, Shawn Tully, an editor at CNNMoney, wrote that that France was in “free fall.” The latter actually offered a few specifics, arguing that France faces a “yawning competitiveness gap” due to rising labor costs. Hmm.
See what I get from European Commission numbers, comparing France with the euro area as a whole, on the chart here. There’s a bit of deterioration there, I guess — but it’s more yawn-inspiring than yawning. Mr. Tully also declared that “France’s decline is best illustrated by the rapid deterioration in its foreign trade. In 1999, France sold around 7 percent of the world’s exports. Today, the figure is just over 3 percent, and falling fast.”
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But just about every advanced country, the United States very much included, has a declining share of world exports (Germany is an exception); a research paper from the Federal Reserve Bank of New York published last year notes that this decline is more or less in line with advanced economies’ declining share in world G.D.P. as emerging nations rise, and it portrays France as more or less typical.
Again, the point is not that France is problem-free. The question is why this only moderately troubled nation attracts ratings downgrades and so much apocalyptic rhetoric. And the answer just has to be politics. France’s sin isn’t excessive debt, especially poor economic growth, lousy productivity (it has more or less matched Germany since 2000), poor job growth (ditto), or anything like that. Its sin is that of balancing its budget by raising taxes instead of slashing benefits. There’s no evidence that this is a disastrous policy — and in fact bond markets don’t seem concerned — but who needs evidence?