France’s Path Not Taken
The new president of France, be it Nicolas Sarkozy or Ségolène Royal, will face a tough challenge when it comes to putting the French economy back on its feet. While the world economy is booming for the fourth consecutive year, with a historically unprecedented growth rate of about 5%, the French economy is limping. In 2006, it grew by only 2.2%, while growth rates of only 2.1% and 1.9% can be expected for 2007 and 2008, respectively, according to a recent forecast by the German Economic Research Institutes. This is significantly below the average of the old EU countries for these three years – 2.7%, 2.6%, and 2.4%, respectively.
France is currently one of Europe’s laggards, only slightly ahead of Italy and Portugal. Even Germany is performing better. With a growth rate of 2.7%, the German economy clawed its way back to the average of the old EU countries in 2006, and it can be expected to grow at 2.4% in 2007 and 2008, far faster than France.
France’s meager growth is surprising. Until recently, the economy was doing fairly well, outperforming many EU countries. While Germany grew by only 14% in the ten years from 1995 to 2005, ranking as Europe’s “vice-laggard” next to Italy, France grew by 23.6%, which was nearly the old EU countries’ average of 24.3%. In 2001, France’s gross national income per capita overtook that of Germany, and is now 4% higher. And yet recent growth figures seem to have reversed this trend for the time being.