The European debt crisis has reached France, the second-largest economy in the Eurozone after Germany. The country has been making headlines with drastic job cuts these days: Its troubled car maker, Peugeot SA (EPA:UG) (PINK:PEUGY) Citroen, announced 8,000 job losses, and the proposed closure of a car plant. The French trade union CGT has even estimated that French companies may cut up to 80,000 jobs due to the recession.
Meanwhile, press commentators in Europe’s leading economy react without any German “Schadenfreude“; but all of the pundits seem to be in a hurry to say that they have seen it coming. Neither Sarkozy, nor the new Socialist President Hollande, promoted policies quite to the German’s liking, according to the weekly Süddeutsche Zeitung:
While Germany only saw a 6 percent rise of labour costs from 1999 to 2011, French labour costs increased by 27 percent in the same time, almost as much as they have in Italy. The consequence, argues the Süddeutsche, is a creeping deindustrialisation: While German order books are full, French companies suffer from sinking demand.
Germany’s Frankfurter Allgemeine Zeitung argues that France has lost some of its old time glory, and that Berlin has replaced Paris as the source of independent fashion trends, and as a cultural magnet for free spirits. The reason again, according to the newspaper, is that France has become too expensive when compared to other countries.
Quoting Henrik Uterwedde, an economist, the newspaper writes that France lacks small and medium-sized comanies, that, like the famous German “Mittelstand“, would outsmart competitors and specialize becoming market leaders in their chosen field. There are entrepreneurs for sure, but they are not sufficiently export-oriented, Uterwedde argues. Young people in France have problems finding work because, unlike in Germany, there is no formal apprenticeship that prepares school leavers for a job.
The newspaper concludes that France’s state, and its economic policy are still too centralized, and that it needs reforms modeled on Germany: While German wage restraint, and government incentives to raise companies’ competitiveness have advanced Germany’s position during the last ten years, France did not take any such measures.
Interestingly enough, France’s new President Hollande has already initiated something that actually does draw its inspiration from Germany: The new “social conference“ that will be held regularly to advance the dialogue between employers and trade unions, is modeled on the German autonomy in wage bargaining.
We discussed the French and German economies, we will save politics and history for another time!