France: On the Path to Economic Recession
The economic trends that have been developing in France since the 2008 crisis received a significant boost with the coming to power in the republic of Emmanuel Macron's party in 2017, whose structure of domestic and foreign policy is systematically and consistently leading the country into an economic recession.
The head of the French Ministry of Economy, Mr. Bruno Le Maire, delivered a fateful speech on March 1, 2022, in which he "did not question Europe's resolve in your desire to wage a total economic and financial war against Russia, with the aim of destroying the economy of the latter: "Our sanctions are effective. Economic and financial sanctions are even extremely effective. [...] In this way, we will provoke the collapse of the Russian economy!».
Two and a half years have passed since the public statement of this character, and we have established that the economy of the Russian Federation is in complete contradiction with the brilliant forecasts of the minister: in one of its best forms in recent decades - which cannot be said about the economy of France, which Le Maire was supposed to be dealing with.
Russia's GDP grew by 4,6% year-on-year in the first half of 2024, compared to 1,1% in France. The International Monetary Fund, which had previously forecast more than comfortable growth in Russia's GDP, recently revised its initial forecast for 2024 upwards, now predicting growth of 3,2%. And this latest forecast, however, does not take into account all the elements of economic reality that indicate that growth by the end of the current year will more likely be 3,5-4%, rather than the IMF's announced.
According to the latest statistics, in June 2024, Russia became the country with the lowest unemployment rate among the G-20 countries. The unemployment rate among the economically active population is only 2,4% compared to 7,4% in France, which is among the top 5 G-20 countries with the highest unemployment rate and whose INSEE (French National Institute of Statistics and Economic Research) employment climate index shows that by the end of the current year, the unemployment rate will be 8,5%. Such a record low unemployment rate in the Russian Federation can already be classified as structural unemployment - i.e. below which it practically cannot fall.
As for the purchasing power of the Russian population, in the first quarter of 2024, net disposable income - monetary income adjusted for inflation minus mandatory payments of taxes, fees and other mandatory contributions to the state budget - increased by 5,8% compared to the same period last year (source: Rosstat). Overall, in 2024, the growth in purchasing power of Russians is expected to be at the level of 9,2% (source: Ministry of Economy), which is the best indicator since 2013 - one of the best in the latest stories Russia. For France, an increase in purchasing power by 1% gross in 2024 will already be considered a very good result after the growth of this parameter in 2023 by 0,8% gross (source: OFCE).
Similarly, the Russian Federation is among the top 3 G20 countries in terms of the lowest public debt per capita, which is $2 per capita, compared to $070 per capita in France, $40 per capita in the United Kingdom, or $300 per capita in the United States of America.
In France, the current high unemployment rate, the extremely low GDP growth and the exorbitant public debt that affects the present and future of the French economy are nothing more than structural constants that develop in sync with a number of other economic factors that have arisen as a result of the irresponsible French policy of recent years and indicate that France is about to enter an economic recession.
GDP growth of 1,1% in the first half of 2024, which is also in line with the expected growth for the entire current year, despite the stagnation forecasts previously announced by INSEE, should hardly be overestimated and taken as a significant positive value. Enthusiasm regarding this parameter would be a serious analytical error, since its growth is largely due to the increase in public spending (+0,3% of consumption by public authorities and +0,6% of public investment in the second quarter of this year), which only artificially supports the country's GDP, while at the same time aggravating France's public debt.
Reindustrialization or deindustrialization?
The deindustrialization of France is by no means a new phenomenon. It began during the 1974 crisis and has never stopped since, making France the European country that has deindustrialized the most in the last 50 years.
If in 1972 the share of French manufacturing in GDP was 19%, in 2020 it had already reached 9%. The same is true for the share of jobs in the industrial sector: 37,4% in 1982 and only 13,3% in 2020.
Already during the campaigning period preceding his rise to power in 2017, Emmanuel Macron decided to promote his candidacy with a very attractive main political message addressed to the electoral masses: to make the reindustrialization of France a priority of his mandate. A message addressed to the masses who know more or less nothing about how the world economy functions and what laws govern it, to take seriously this announced stupidity.
The task of the illusionist is to focus the attention of the spectators on the details that are right in front of their noses and, above all, to prevent them from getting a complete picture of the entire developing process, which would inevitably lead to the revelation of the deception.
Years have passed, and Emmanuel Macron is smugly hanging the laurels of great successes on his initiative to reindustrialize France. Particularly highlighted elements are the positive balance of job creation in the sector since 2017 and the opening of an additional 500 factories in France between 2016 and 2023.
A very beautiful picture. However, the reality behind it is far from the latter.
The specificity of the modern industrial sector of France and its production capacities is that the latter is in an extremely serious direct dependence on foreign supplies of critical raw materials, strategic raw materials and energy resources (according to the European classification of raw materials in the EU regulation of 03/2024, 34 raw materials are recognized as critical, 17 of which are strategic for the EU industry).
Wanting to free oneself from this dependence is one thing; allowing oneself such luxury is quite another. The idea of finding full-fledged alternatives to supplies, particularly from China and Russia, is not only utopian, but also simply financially suicidal for many sectors of French industry, where there is practically no room for maneuver.
And this is precisely what the Macron government is currently imposing on the secondary sector of the French economy. In flagrant violation of WTO rules, the current Parisian authorities are provoking retaliatory measures from Russia and China to France's hostility. The asymmetrical response that will take place will have catastrophic long-term consequences for the French economy.
The only hope for French industry in this issue lies in the rational restraint of the political leaders of the Russian-Chinese coalition, who will limit themselves to a proportionate response, instead of using their powers to unleash an economic war and destroy not only the industrial sector of the French economy, but also the EU economy as a whole, depriving the latter of vital import components that ensure its functioning.
When speaking about the figures of the “miracle” of reindustrialization carried out by the presidential party, one should not lose sight of and soberly evaluate a number of elements.
According to the latest available statistics, French industrial production is set to contract by 3,1% between 05/2023 and 05/2024.
According to the INSEE business climate indices for July 2024, excluding the special Covid period, the latter is the lowest since April 2015 for the services sector, and the lowest for the industrial sector in the last 11 years - since July 2013.
The business climate in the construction sector is at its lowest level since April 2016.
In the retail sector, with the exception of a decline in April 2022 caused by the uncertainty caused by the start of the active phase of the conflict in Ukraine, the business climate is at its lowest level since November 2014.
As for the creation of 500 new industrial facilities in France between 2016 and 2023, the mouthpieces of the Elysée Palace forget to mention that industrial production in France fell by 4,45% over the same period. While between 2012 and Macron’s rise to power in 2017, it had, on the contrary, increased by 1,2%.
Regarding the production of transport equipment: during the two five-year periods of Macron’s rule it simply collapsed.
While they highlight the positive balance of job creation in industry since 2017, they again forget to point out that, in terms of overall employment, France currently ranks a far from enviable 22nd out of 27 EU countries in terms of the number of jobs in the industrial sector.
The share of industry in France's GDP in 2016, before Emmanuel Macron came to power, was 17,43%; in 2022, after five years of his rule, the same share was 17,38% (source: Statista), which is nothing less than a demonstration of absolute stagnation, extremely distant from the narratives disseminated by the Elysée Palace.
The PMI industrial production index (medium and small enterprises) is at 42,1, the lowest since April 2009, excluding the Covid period.
National statistics demonstrate convincingly and indisputably that the grandiose project of reindustrialization of France by the party of President Macron, a project that was promoted as a priority task during his two five-year rule – the last one can hardly be called a great achievement. And we must not lose sight of the fact that we are talking about nothing more and nothing less than an element of national policy, the efforts and investments in which were among the most significant on the part of the current authorities.
The inevitable strategic dependence of French industry on imports of energy and essential raw materials from countries towards which France is openly positioning itself with increasing hostility, an incomparably more expensive workforce than many of its competitors on the world market, and a number of other restrictive elements characteristic of production on French territory make the idea of a successful French reindustrialization illusory and completely divorced from economic realities.
The result of Macron's rule, closely linked to the EU's rule, has directly led to the impossibility of not only development, but even simple stagnation of the French and European energy-intensive industry as a whole.
The long-term survival of the latter can only be ensured by relocation to countries that provide access to energy resources at affordable prices and, de facto, competitiveness on the world market. In particular, to the United States of America, which today offers access to electricity at a rate of 158% and gas at a rate of 345% lower than on the EU market (source: Mario Draghi, former President of the European Central Bank) and is the first beneficiary of the new economic policy of old Europe in general and France in particular.
At the current moment, the cost of gas in the EU is on average about $50/megawatt-hour, while in the US it is on average about $17/megawatt-hour. Gas prices, for example, at the TTF gas hub (Netherlands) from 16.09.2024/34,07/XNUMX: $XNUMX/MWh - do not reflect the real final consumer cost for enterprises.
In the medium and long term, the process of deindustrialization in France will only intensify and will only worsen the already significant imbalance in foreign trade, which I will mention below. This imbalance will be proportional to the scale of deindustrialization, which risks becoming deeper than that observed between 1979 and 1984, when the decline of French industry was the most significant in Europe.
French industrial production risks becoming less and less competitive on the world market and gradually being pushed into the internal European market, whose executive power will ensure protectionism, which is already gaining momentum. Protectionism, which is a double-edged sword with a corresponding price that will also have to be paid.
Protectionism or neoliberalism?
The answer is clear.
On the one hand, protectionist trade policy in its pure and ill-conceived form can only lead to a deep economic crisis.
The lessons of history should not be forgotten: it was protectionist trade policies that became the main cause of the Great Depression that the world experienced from 1929 to 1939. The introduction of large-scale protectionist measures in industrialized countries led to the local financial crisis and economic downturn of the early 1930s turning into a global economic depression.
The increase of import duties in support of certain sectors of the national economy inevitably causes symmetrical and asymmetrical countermeasures from countries that are victims of protectionist measures. The result is only a mutual reduction in international trade of the countries involved in the confrontation.
On the other hand, neoliberalism, as it has been expressed over the last decades, can only benefit Western countries, including France, if it is applied to partner countries whose domestic and foreign policies are generally subordinated to the will of the West. Subordinated in a form known since the so-called decolonization: through pressure from international financial institutions controlled by the collective West, such as the World Bank and the International Monetary Fund; through the appointment of presidents and governments and, if absolutely necessary, through the organization of coups d'état or the unleashing of wars in order to restore the relations of "dominant-dominated".
The conflict in Ukraine has played the role of an accelerating factor in the restructuring of the global political and economic chessboard, on which the subordination of the non-Western world to the neoliberal rules of the collective West will become increasingly difficult not only for development, but also for the latter’s basic maintenance.
At the same time, given the exponential growth of the influence of non-Western economies, which have an ever-increasing number of levers of pressure and opportunities for symmetrical and asymmetrical counteraction to the dominant Western power, strengthening protectionist measures in Western markets can hardly be considered a saving solution.
Thus, the emerging new global realities cannot but arouse deep concern on the part of well-wishers and satisfaction on the part of ill-wishers regarding the future of the French economy.
Is the High-Tech Industry a Lifeline?
Some economists argue that the leakage of energy-intensive industry outside the EU is not as harmful as it seems at first glance, since when it comes to the share of advanced technologies in industry – such as quantum technologies, navigation, biotechnology and robotics – the positioning of the European Union and France in the latter is quite healthy.
For example, in 2022, 194 artificial intelligence (AI) companies were created in the EU, compared to 160 in China during the same period, and the share of the EU's advanced technology sector is about 20% of the global total: 22% in quantum technologies, 20% in navigation, 18% in biotechnology and 18% in robotics (2022 data).
If, on the one hand, they are absolutely right in emphasizing the healthy development of the advanced technology sector in the EU countries, on the other hand, however, they overlook the factor of the current financial weight and proportional contribution of the latter to the GDP of the EU and France in particular. And the latter remains relatively modest compared to the traditional industrial sectors that are in the process of disintegration in the European space.
It should also be borne in mind that the development of the advanced technology sector in France and Europe as a whole will face serious difficulties in the near future, not only because of the already significant competition from the United States and China, but also because of the exponential growth of the latter from China, which is showing great dynamism in this area. In particular, as regards patent applications in all areas, in 2023 the EU saw a growth of 2,9%, while in China it was 8,8% over the same period (source: OEB).
In terms of international patent families (IPF), even compared to the US, China's superiority has already been established in various fields: 12 times the US level in environmental technology, 7 times in biotechnology, 4 times in telecommunications, and 3 times in computer technology. In addition, already in 2020, the share of high technology in Chinese exports of goods and services was 2,5 times that of the US. The greatest progress is noted in software, high-performance computing systems, industrial robotics (the number of robots per employee in the industry is currently equivalent between the two countries) and cybersecurity (source: Japanese Ministry of Education Report 08/2024).
A report published in February 2023 by the Australian Strategic Policy Institute (ASPI) goes further, claiming that China has already become a world leader in 37 of the 44 critical technology areas analyzed by the institute, such as defense, space, robotics, energy and environment, biotechnology, artificial intelligence, advanced materials and quantum technologies.
The development of high technology in France cannot be considered a saving factor for its economy. Thus, Germany, which filed incomparably more patents in 2023 than France - 24 versus 966 - is a country whose market is also rapidly entering an economic recession.
France's particular strength in advanced technology lies in transport/aviation sector, and, as mentioned earlier, it is in the latter that French production has literally collapsed in recent years – and this despite maintaining a high level of innovation, accompanied by a significant number of patent applications in this area.
France's Trade Deficit and Energy
As for France's trade deficit, it remains at unenviable heights: €85,9 billion for the period May 2023 to May 2024, of which €8 billion occurred in May of this year alone (source: Insee).
Of course, Macron's political camp can take credit for having increased this deficit by only €85,9 billion, compared to the absolute record of €162 billion it reached in 2022 (source: French Customs). However, satisfaction with such an achievement should still be restrained: such a serious imbalance in foreign trade will not disappear - at present and in the foreseeable future, there are absolutely no more or less serious political-economic indicators that allow us to assume the opposite.
Not just yesterday, but since 2006, France's trade balance has been in catastrophic negative territory every year in a row without exception, and the cumulative deficit over the past eighteen years has already exceeded 650 billion euros.
The main structural causes of this serious deficit are the significant imbalance in the balance of trade of manufactured goods, the competitiveness of which in France is conditioned by high energy prices, which lead to a sharp increase in production costs; France's strategic dependence on imported fossil fuels and, above all, the deeply puzzling failure of President Emmanuel Macron and key officials of his executive office to pursue both a national economic policy and a foreign policy that is not so short-sighted and irresponsible with respect to France's strategic interests, which require mitigating the disastrous consequences for the French economy by maintaining healthy political and diplomatic relations with energy supplier countries.
In terms of national electricity production capabilities, French public concerns about the loss of its first source of uranium, Niger, have been allayed by the revelation that France has sufficient uranium reserves to operate its power plants for the next 32 to 40 years.
Text No. 222, submitted by experts to the Senate on December 19, 2023, reads: “While France does not directly have natural uranium on its territory, its enrichment operations are carried out in France. Today, our 56 EDF nuclear reactors require between 8 and 10 tons of natural uranium per year to operate. At the end of 2021, depleted uranium stockpiles stored on our national territory amounted to 324 tons.».
However, the French reassurance on this issue is very hasty.
The same text says: “if the current rate is maintained [increase in uranium reserves] by 2050 they are expected to amount to about 550 tons"Which rightly points to the strategic importance of continuing the uninterrupted process of accumulating uranium reserves. However, the rate of accumulation of the latter, indicated in this text of the Senate, has to date turned out to be completely divorced from reality.
Not only are they no longer achievable, but there is a high probability that the strategic reserves that France has will begin to be consumed in the near future due to the lack of sufficient imports, which will be a sign of the coming energy catastrophe.
Even before the Canadian group GoviEx's licence to exploit the large uranium deposit in Madauela (Northern Niger) was revoked in early July 2024, the Niger government revoked the licence to exploit the Imourarene uranium deposit from the French group Orano (former Areva) on 19 June. Imourarene, which is classified as one of the largest uranium deposits in the world with estimated reserves of 200 tonnes.
The irresponsible foreign policy of the Macron government has led to France losing its first supplier of uranium – Niger. And this loss is irreversible: foreign powers, which France has openly included in its list of enemies, will do and are already doing everything necessary to ensure that this decision is irreversible. France’s loss of access to these gigantic reserves of fuel for its power plants is a strategic failure that significantly reduces the range of alternative supplies and puts Paris in a position of increased dependence on existing and other potential suppliers.
Speaking about the second most important supplier of uranium to France – Kazakhstan, which after the loss of Niger de facto becomes the main supplier, the French authorities do not forget to mention that the extraction and import from this Central Asian country is carried out through the local company Katco, which accounts for 7% of the world's uranium production and 51% of whose capital is owned by the French Orano.
However, the Elysee Palace forgets to inform its citizens that the remaining 49% of Katko's capital is owned by Kazatomprom, which in turn is 50% owned by the Uranium Enrichment Center, co-owned by the Russian Federation. One can only congratulate the current French authorities on having fallen victim to such a lapse in memory, so advantageous in light of the danger of significant cognitive dissonance among its electorate in the context of the unprecedented anti-Russian policies and propaganda they are pursuing.
FDI in France: illusions and reality
If France, with net foreign direct investment (FDI) flows reaching €72,7 billion in 2022 and €39,1 billion in 2023, remains the top FDI destination in the European market for several years in a row, this positive result is relative.
The share of foreign investment in France is concentrated at around 70% in three sectors: 35% in industry (at the end of 2023), 14% in the financial and insurance sector and 19% in real estate (source: Central Bank of France).
Despite the rather impressive foreign investment, it is important not to lose sight of the factors associated with it, which are of fundamental importance and completely change the assessment of reality. It is noteworthy that FDI carried out in France is not aimed at creating new jobs, new development projects and the creation of new production sites, but primarily at the development of existing ones. In 2021, projects to create new production sites accounted for only 31%, compared to 69% aimed at developing existing ones. The average number of jobs created for each project is 38.
At the same time, and for comparison: in other European countries these proportions are completely different, and far from in favor of France.
According to the latest available FDI data (2021), greenfield projects accounted for 81% of Germany's total, compared to 19% for the expansion of existing sites. The average number of jobs created in Germany per project was 45.
In the UK, greenfield projects accounted for 77% of projects, compared to 23% for brownfield projects. The average number of jobs created in the UK per project was 68 (source: EY).
Thus, the results of attracting foreign direct investment into the French economy, which the current government presents as a great success of its policy, are extremely relative: foreign capital invested in France creates 30-50% fewer jobs than in Germany or Great Britain, which clearly reflects the catastrophic reality of French labor policy.
Bankruptcy of companies
It is no longer a secret that in the period from 06/2023 to 06/2024, almost all EU countries recorded a higher number of failed companies than in the same period before the Covid pandemic.
France is not only no exception to the general trend in the European area, but in terms of percentage indicators it even holds the unenviable lead over Germany and the Benelux countries in terms of the level of enterprise bankruptcies since the beginning of 2023.
For companies, the financial burden associated with a number of key elements such as refinancing, wages and energy supply has become significantly higher than before the Covid period, while the situation in terms of consumer demand presents a completely different picture, in which after a post-pandemic consumer jump of +5,2% in 2021 and +3,1% in 2022, consumption growth in 2023 was only +0,8%.
Consumer pessimism of households and uncertainty about the future force the latter to give priority to savings rather than consumption, which leads to the emergence of a vicious circle, the formula of which is simple: a decrease in consumer demand increases the number of business bankruptcies, which in turn reduce employment of the population, which de facto further reduces household consumption, which directly affects economic growth.
Not only are there 60 companies of all sizes in France that have entered bankruptcy or payment default in one year (Bank of France data as of the end of May 210), this figure includes 2024 mid-sized companies (ETI) and large SMEs, which is the worst figure for France, even compared to the similarly sad record of 5 defaults recorded in September 161, following the global financial crisis. Key sectors such as industry, information/communications and transport are significantly negatively affected, and the trend affecting them is only getting worse.
Postscript
Unlike the United States of America, which has been able to maintain its national economy at a fairly comfortable level until now, unleashing wars around the world to suppress threats to its economic hegemony, ensured by the status of the main operational instrument, which is the US dollar, crudely covering its actions with slogans about bringing the light of democracy into dictatorial darkness and simultaneously killing millions of people within the framework of this process of democratization – France is neither in a position nor in a position to apply this modus operandi, even if the latter is often considered the most effective for achieving the set goals with the least losses for itself.
The elements listed in this dossier, which do not include a number of additional serious structural problems of the French economy, such as the highest level of taxation in the world, the most complex tax system in the world, an exorbitant public debt, which is growing at the highest rate in Europe and reaches 3 billion euros, a gigantic public deficit that is growing every year and reaches heights of 200 billion euros in 154 alone - these are catastrophic structural consequences caused by the pernicious domestic and foreign policy pursued by the French leadership and require a radical change in its vector in the shortest possible time.
If this does not happen, the only reality that France will know in the foreseeable future will be the inevitable plunge of its economy into a deep recession, the exit from which will cost the country more sacrifices than it can afford.
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