Community Review: The UK & French economies

25th November 2011

Rod first suggesed the "seven weak (or weaker) countries Belgium, France, Greece, Ireland, Portugal and Spain have 59% of the Eurozone GDP and an average of 93% debt to GDP (2010 figures which will be worse now, as they all have budget deficits".

This provoked JW to remonstrate: "The UK media would love you to think France and Germany are going to 'fall-out', go their separate ways; they will not. The amount of rabid anti-French nonsense in the London-based media is quite extraordinary, perhaps only matched by the equivalent in Paris. Plus ça change (plus c'est la même chose)."

Rod retorted with a comment and stats.

"Mainly because of France's bank exposure to Greek and Italian debts, and possible bank bailouts and their much bigger % budget deficit and negative balance of payments. 

Debt owed to France: Greece €41.4bn and Italy €309bn 
Germany: Greece €15.9bn and Italy €120bn
 (Source BBC ).

 Budget deficit 2010 
France 7.1% 
Germany 4.3% 

Balance of payments 
France -$44.96bn 
Germany +$184.78bn
 (Source OECD)

But perhaps this article by Telegraph's Jeremy Warner gets to the heart of the matter.

He writes: "Viewed impartially, France's fiscal position doesn't look any worse than the UK's, and on some measures rather better. Gross public indebtedness is about the same, while the primary deficit is quite a bit lower."

However Warner suggests Britain has some advantages too. "The Chancellor would say it is because the UK has set out a credible fiscal strategy. There's plenty of truth in this contention. But there are also a number of other interconnected reasons. The most important is that Britain still has its own currency and monetary policy with which to support demand and growth. Locked into the single currency, France has no such room for manoeuvre. Without growth, public debt rapidly becomes unsustainable. Too much debt and not enough growth is a lethal combination."

This inter European rivalry certainly exercises some. 

For example, here is the Guardian in 2008 suggesting Italy and France were due to overtake the UK.

At the time, the paper quoted Ben Read, managing economist at the CEBR, saying: "The UK economy overtook both Italy and France in the 1990s. However, this position was based on an over-valued sterling and debt-fuelled growth; it is set to be reversed."

Just this spring, the Shadow Chancellor Ed Balls suggested the UK was in the slow lane also telling the Guardian: "These figures expose how, since George Osborne's spending review and VAT rise, Britain's economy has gone from the economic fast lane to the slow lane. As our economy has flat-lined with zero growth over the last six months countries like France, Belgium, the Netherlands and even Spain have overtaken us while Germany is powering ahead. Osborne is taking in Britain by making a political choice to cut further and faster than any other major economy in the world. He doesn't seem to understand that without strong growth and more people in jobs, paying taxes rather than claiming benefit, it's harder to get the deficit down".

And so the nub of the debate appears to centre of this. France is, arguably, in slightly better shape but its fortunes are more strongly tied to an economy i.e. Germany which isn't exactly embracing policy that is in the wider zone's interests. And that includes France, though France wouldn't like to think so.

Vassilis_101 sums it up.

"I am no expert but I think that the main difference between France and UK is that France has adopted a funny currency called Euro which in reality is controlled by Germany and it is the DM in disguise. This puts her in a negative position as she does not control her economy. This is a huge difference, otherwise both economies are close to bankruptcy, both have huge public and private debt (UK might be worse I think), unsustainable and too big public sectors etc. etc. former colonial powers in a constant decline after WWII."

So whether the UK or France is in better shape might be immaterial. If Europe pitches into a recession again, they will both be smaller economies.

Perhaps we should learn to get on better. The Guardian reports on big queues at Marks and Spencer's new flagship store in Paris. Perhaps that is a better way – to simply get along and shop in each other's shops.

More on Mindful Money

New Europe: What are the core nations?

France and Germany consider options for leaving Eurozone

Eurozone Crisis: Could German/French rift break eurozone apart?

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