Chronologie der Krise

Wie aus einer Immobilienblase eine Weltwirtschaftskrise wurde…

Frankreich: Wird aus „PIGS“ bald „PFIGS“?

Posted by hw71 - 14. Februar 2010

OK, „PIGS“ gibt die Lage in der Eurozone ohnehin nicht mehr realistisch wider, denn „Irland“ fehlt genauso wie England und … und … und. Aber über die Lage in Frankreich hat man bisher wenig gelesen. Da muss man wohl schon bei „Reuters India“ nachschauen…

ANALYSIS – After helping Greece, France has to help itself

Thu Feb 11, 2010 8:33pm IST

By Crispian Balmer

PARIS (Reuters) – Although France is in the forefront of moves to shore up Greek finances, it can ill-afford to throw much money Athens’s way and should rapidly look to strengthen its own fragile fiscal position.

France’s financial problems are nowhere near as serious as those of Greece, but a hard look at its latest budget forecasts suggests Paris is closer to the so-called European periphery nations than it would care to admit.

The French deficit is set to climb to 8.2 percent of gross domestic product this year, the highest for at least half a century, while its debt is projected to jump to 83.2 percent of GDP – up 20 percentage points in just two years.

„People should be more concerned about France,“ said Nick Kounis, chief European economist at Fortis Bank.

„If you look at the public finances, France resembles Italy much more than it does Germany … and its debt could easily spiral if these large deficits go unchecked,“ he added.

Even before the financial crisis hit in late 2008, French Prime Minister Francois Fillon said bluntly that France was „bankrupt“. Since then billions of euros have flowed out of state coffers to prop up the economy and revenues have dropped.

President Nicolas Sarkozy has made clear that his priority is to bolster the frail economy, which is forecast to grow 1.4 percent in 2010 after a 2.2 percent contraction in 2009.

But in signs that he is concerned about national accounts, his government has brought forward to this year a reform of France’s costly, pay-as-you-go pensions system and is promising to limit public spending to under one percent from 2011.


Such commitments sound promising, but France’s structural deficit, tied to its chequered history of budget management, suggests Sarkozy will almost certainly fail to meet his recently announced goal of cutting the deficit to 3 percent by 2013.

„Unless we’ve totally underestimated growth it seems impossible to do that,“ said Societe Generale economist Olivier Gasnier. „We mustn’t forget that there will be the presidential election in the middle. It’s very, very difficult to imagine.“

France’s forecasts are based on hopes the economy will grow by 2.5 percent from 2011, which very few analysts believe is feasible. Quick deficit-busting measures also look hard to find.

France’s tax burden is already one of the highest in Europe at over 40 percent of GDP and Sarkozy has ruled out tax hikes to bolster coffers, although he is set to curtail tax loopholes.

Structural expenses are also high, drastically limiting the room for manoeuvre, with spending on healthcare and pensions — both notoriously hard to curb — hitting 21.3 percent of GDP, according to OECD data. The euro zone average is 18.6 percent.

France recorded its last budget surplus in 1974 and has failed to introduce the sort of tough structural reforms that neighbour Germany has managed to impose on its own workers.

As a result, French exporters have lost major market share over the past 20 years and France now runs up multi-billion euro trade deficits compared to surpluses in Germany, meaning it will not benefit hugely from the pick-up in world commerce.


While France’s status in the EU has always allowed it to ride out tensions over breaking Brussels‘ budget rules, the Greek crisis has shown financial markets can exact a heavy price by raising debt servicing costs and market interest rates.

That in turn undermines the state’s freedom to spend in the longer-term as well as limiting demand by making it more expensive for consumers and companies to borrow.

France’s top audit body warned on Tuesday that unless the government got a firm grasp on its deficit it risked a downgrade of its AAA sovereign credit rating.

Ratings agency Fitch said this week that France, along with Britain and Spain, were amongst the most vulnerable to seeing their prized triple A ratings reduced.

For now markets do not seem overly worried. The spread between benchmark 10-year French and German bonds hit a high of only around 38 basis points during the recent EU crisis, against more than 400 for Greek paper and more than 100 for Spain.

„To some extent France gets a free ride because it is the second biggest economy in the euro zone and tends to benefit from liquidity and safe haven flows,“ said Fortis’s Kounis.

However, one of the reasons Sarkozy has been at the forefront of moves to help Greece is fear that the market turmoil might spread and end up forcing France to pay significantly more to service its ever-growing debt mountain.

On Thursday, EU leaders in Brussels reached a deal to provide aid to Greece, in what amounted to the first bailout of a euro zone member since the currency was created 11 years ago.

„In theory a domino effect is possible which is why it is so important to stem the Greek haemorrhage at once,“ said Marc Touati, and economist and director general at Global Equities, a financial services brokerage.

„After (Greece) there is Spain, Portugal, Italy and that could then reach France.“

(Additional reporting by Jean-Baptiste Vey and Anna Willard; editing by Patrick Graham)

© Thomson Reuters 2010 All rights reserved


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