Thursday, May 21, 2009

The "French Model" (1) : the Upside...

Just a few interesting figures and points found in last week's The Economist, in their report called "Vive la différence"on the French economic 'model'.
First the upside :
[France's] GDP is expected to shrink by 3% this year, according to the IMF, against 4.1% in Britain, 4.4% in Italy and 5.6% in Germany.
The government, usually reprimanded for profligacy, is set to have a deficit in 2009 (6.2% of GDP) well below those in America (13.6%) and Britain (9.8%).

- Living less on credit and borrow what you can pay back :

The French are great savers and most have not taken out unaffordable mortgages or spent heavily on credit. Household debt as a share of GDP is less than half that in Britain or America.
- More equality, less disparity

The income gap between the top 10% and the bottom 10% is far smaller than in Britain or America.
Even Peter Mandelson, a former European trade commissioner whom the French regard as a high priest of economic liberalism, recently turned up in Paris to learn more about what he calls industrial activism. “We have something to learn from continental practice,” he said, identifying French long-term strategic planning in such sectors as energy and transport

- Safety net of l'Etat :

Across France, 5.2m workers, or 21% of those with jobs, are employed by the public sector. If you count others whose incomes or jobs are not exposed to the economic cycle, 49% of those either in work or retired are only moderately vulnerable to the recession,.....

- Better cheaper health system

France’s health system, a mix of private and public provision, manages both to guarantee universal coverage and produce a relatively healthy population for half the cost per person of America’s, and with shorter waiting lists than Britain’s somewhat cheaper version. The French have higher life expectancy than both the British and Americans.

- More regulated banking system .

France’s big banks may have lost plenty of money, but they have certainly performed better than their British or American peers, and most are still in profit. One reason is tighter regulation. Take the mortgage market. French banks have generally been far more wary about lending to homebuyers.

In 2007 French mortgage debt represented only 35% of GDP, according to the European Mortgage Federation, less than in Germany (48%) and way off that in the housing-bubble economies of Britain (86%), Ireland (75%) and Spain (62%). French house prices did rise strongly. But the Bank of France argues that this was as much because of demographic growth, higher real disposable income and limited housing supply as speculative buying.
The French government has not yet had to rescue any big French bank from collapse, let alone nationalise one.
Banks are under a legal obligation not to push borrowers into more debt than they can manage, and cases are regularly brought to court. So caution is built into the system.

What is certain is that the French "model" has raised the attention of the U.S. (granted, mostly 'liberal') media in the last few months :

Time ran an article entitled “How we became the United States of France”. Newsweek published one claiming that “The last model standing is France”. When Christine Lagarde, France’s finance minister, appeared recently on Jon Stewart’s “The Daily Show”, an American comedy programme, she joked that “maybe you are moving in our direction.”


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