It’s no secret that more than a handful of North Americans look at the French as a haughty and uber-confident culture. The fact of the matter, however, is that, these days, such stereotypes couldn’t be further from the truth.
Last week, the confidence of France’s manufacturers sunk to a new, 19-month low in May.
Although analysts had predicted an increase in confidence for French companies, increases in costs for raw materials and fuel, a weakening economic environment, slowing growth, and a five-year high in unemployment swung the scales to the downside, putting manufacturers on the edge of their seats for what could happen next.
True enough, growth forecasts are dropping all across the European landscape, including in Finland, the Netherlands, and Belgium, but disappointing results in France are a bad omen of things to come.
France’s GDP is one of the top in the world, and the country is a vital force in the European Union. Last week, Polish Foreign Minister Adam Daniel Rotfeld was quoted with saying, “France is not one of the European states; it is the European state, the driving force for the whole integration.”
And it’s for this reason why the lost confidence we’ve seen from French manufacturers is so troubling.
We’ve seen corporate confidence drop off in Germany and Italy recently, too, but those disappointments had been predicted — the news from France came as a surprise — and it’s bad news for the entire European economy.
“There’s no sign of a turnaround. Bad news from one of the major euro zone countries is bad news for the others,” Citigroup Inc. Economist Jean-Francois Mercier said, and I couldn’t agree with him more.
At the same time, growth in the world’s most popular tourist destination has also been slowing more aggressively than economists had expected. As a result, the OECD recently lowered its forecast for French growth to 1.4% from 2%.
Adding to the fire is the fact that the euro was trading near its seven-week low against the USD last week, representing its fifth week of losses, on expectations that France would vote against the EU Constitution in the May 29, 2005 National Referendum. Since a “no” vote from France would kibosh the deal intended the strengthen and smooth out the union, there was a lot of pressure on this vote. Stay tuned to international news today to find out the results of this vote.
France’s President Jacques Chirac is also facing the heat, with his popularity down to his lowest approval rate since 1997, because of continued unemployment woes and talks of further budget cuts.
Things are noticeably taking a turn for the worst in France, and as Chief Economist Marc Touati at Natexis Banques Populaires SA in Paris said, “[Last week’s] report means that we’re not yet in recession in manufacturing, but it’s not very far off.”
A recession in manufacturing in France will negatively affect the European Union as a whole, and the tragedy is that this happening no longer looks like a possibility — it’s almost inevitable.
The world economy is changing quickly — and changing for the worst. You can see issues raising in every corner of the globe. France is no exception, and neither are the United States and Canada.
Now’s the time for our governments and every individual under them to put a plan into place to strengthen our global economy for the future.
I truly believe that if individuals take control over their own economic destiny, the global stage can only improve. Small changes in your daily spending, saving, and borrowing habits really do have an impact on the bigger picture.
Back to Michael for Some Closing Comments
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