France is Europe’s ‘time-bomb’: The Economist

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“The crisis could hit as early as next year,” the magazine warns in a cover story.
“The crisis could hit as early as next year,” the magazine warns in a cover story.

After accusing the French of being in “denial” during the presidential election campaign in late March, the British weekly The Economist now says that France is “the time-bomb at the heart of Europe.”

“The crisis could hit as early as next year,” the magazine warned in a cover story to appear on Friday with the sub-title: “Why France could become the biggest danger to Europe’s single currency.”

The Economist takes French President, Francois Hollande and Prime Minister Jean-Marc Ayrault to task for delaying crucial reforms, saying in a separate French language statement: “Neither Mr. Hollande nor Mr. Ayrault appear to be the kind of leader courageous enough to impose reforms against generalised opposition.”

France’s new Socialist government does appear to understand how serious the economic situation in Europe has become and the need for reforms that allow the economy to compete more effectively on a global level, the British weekly acknowledged.

But it expressed concern “that these recent changes come too late and are insufficient.”

The Economist’s long list of French problems include a stagnant economy, high unemployment, a huge trade deficit and a public sector that accounts for almost 57 per cent of gross domestic product (GDP), “the highest share in the euro zone.”

Business sentiment has deteriorated meanwhile, following “a string of leftish measures, including a 75 per cent top income tax rate, increased taxes on companies, wealth, capital gains, and dividends, a higher minimum wage and a partial rollback of a previously accepted rise in the pension age.”

Meanwhile “neither the elite nor the voters are yet prepared to transfer more sovereignty (to EU institutions) just as they are unprepared for deep structural reforms,” the story said.

Although Hollande is pushing for measures to make France more competitive, “France is aiming at a moving target” because “all eurozone countries are making structural reforms, and mostly faster and more extensively than France is doing,” the magazine said.

“The IMF (International Monetary Fund) recently warned that France risks being left behind by Italy and Spain,” it noted.

“Mr. Hollande does not have long to defuse the time-bomb at the heart of Europe,” it concluded.

(This article was published on November 15, 2012)
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