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Is France Europe’s hidden zombie?

Although still outside media attention and investors since its risk premium relative to German bonds remains relatively low, while leaving out the PIIGS, France is the real Europe zombie with an economy losing competitiveness rather quickly to the same extent that the state grew while trying to reach every corner of the economy and protect its citizens with the mantle of well-being. Here are some details which confirm that it is Europe’s Zombie and it goes right to the precipice.

Here’s the cold data of an announced catastrophe:

It is the second largest economy in the euro zone, with a GDP of 2 trillion euros.

In 1999, France sold 7% of world exports. Today it sells only 3% and the number continues to deteriorate.

In 2005, the French trade balance was positive in +0.5% of GDP, whereas today it is negative -2.7% of GDP, which means that imports exceeds exports. The French economy is less competitive, such as cars and machinery equipment sales in China are seven times less than the annual sales volume of these products from Germany.

Elevated labour costs, which combine high wages, limited flexibility in layoffs and higher taxes. French workers are those with fewer hours of work in developed countries and 86% of contracts are fixed. 42 of every 100 euros of wage costs are business expenses or corporate taxes, while in Germany they are € 34/100 and 26/100 in the UK.

Since 2005, unit labour costs in France have been increasing, and the cost to produce a car in France increased by 17%, Germany 10%, Spain 5.8% and 2% in Ireland. In France, a worker earns an average of 35.3 Euros per hour worked, while in Italy the average is 25.8 € and 22 € in the UK and Spain.

The most immediate results:

The results of the French companies have fallen to levels of 6.5% of GDP, a level that is 60% of the European average. The reason is simple, French exports have lost market share and the only way for companies to survive is to lower margins. Fewer margins mean less money to invest in new facilities or technologies. Thus, the costs of French companies have fallen 50% over the past four years.

The irony:

the Netherlands government decided that the State must suck more from companies and limited part of the tax deductions available to them. The result will be less profit and less investment.

In this context, it seems difficult that economic growth affects France in the coming years. In 2012, French GDP grew by a meagre 0.2%, the average increase of French GDP in the last three years was 1.2%, Germany 2.7%. For 2013, it is expected that France enters a technical recession. Unemployment is at record levels for 14 years at a rate of 10.9% against a German rate of 6.7% and it is expected that the public debt to GDP reaches 97% in 2013, higher than the Spanish public debt.

Currently, the French economy is the French State

Expenses represent 57% of GDP. Over the past eight years, the GDP of France rose a sad 7.3% (inflation adjusted). All growth is attributable to the increase in public spending and not the development of the private economy.

And with all this, the French government refuses to stop growing. In 2011 and 2012, he presented a deficit of 5% of GDP, a level that is likely to be repeated in 2013.

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