Europe, and not just the Euro, will sink with France when it goes the way of Greece. Emmanuel Macron, the Economy Minister, wants to plug the holes but his government won’t let him.
The numbers are staggering:
- the economy is stagnating at 0.5%;
- the debt is 97.5% of GDP (2,089.4 Billion), up from 85% in 2012;
- unemployment is officially over 10%;
- its deficit is running at nearly 4%, well above the 3% cap fixed by the E.U. Maastricht Accords;
- France’s generous welfare system is in the red for the 13th year running, 13.2 billion euros in 2015 for a total of over 155 billion euros since 2000.
- 55% of French households do not pay income tax.
- it has a well over 50 billion euro yearly trade deficit and 2015 looks to be worse than 2014.
- it has a 43% employer payroll tax, the world’s highest.
- the cost of labor is 36,2 euros/hour, higher than most other major industrialized countries.
Yet there is much that can be done.
Emmanuel Macron, France’s maverick Finance Minister, knows France is bankrupt and wants to do something about it, even if it means angering the ruling Socialist Party. After calling for the end of the 35 hour work week, paid 39 hours, he is now asking that the privileges of civil servants be cut back.
The French work much shorter hours than other European countries: 1,679 as compared to over 1900 in Germany. They retire on average at 60.3 years old. They have 36 paid holidays in the year. The French Le Point magazine says the French work less than any other developed country: the number of hours’ work per year per inhabitant in France (total number of hours worked divided by total population) is among the lowest of any developed economy – 11% lower than in Germany, 22% less than in Scandinavia, and almost 40% less than South Korea.
Among these privileges is civil servants getting their pensions based on the last six months of salary rather than the best 20 years like everybody else and of course, it is amazing how many get raises and promotions in the year before they retire.
And while you can still retire at 62 in France, many civil servants have a ‘Greek-like’ privilege. In the SNCF national train company, the age of retirement is 55 and only 50 for train drivers. There are nearly twice as many retired as employed! Other civil servants get to retire at 60.
Then there are the journalists who get to write off 7,650 euros from their tax declaration without having to prove they incurred costs, including the majority who have no costs at all.
Even couples making over 100,000 euros a year can get a monthly check from the government for their children.
Because France continues to live beyond its means, Moody’s once again lowered its credit rating, this time to Aa2. Paris lost its AAA in 2012. If Paris can still get cheap loans it is because strong countries like Germany are backing the euro and lenders believe the French will be bailed out. However, successful economies are losing patience and there is no way they could bail out France the way they did Greece, Portugal, Spain and Ireland. It is just too big. The problem is it can fail.