Economics of France

Government economic policy aims to promote investment and domestic growth in a stable fiscal and monetary environment.Creating jobs and reducing the high unemployment rate has been a top priority. The Government of France has successfully reduced a double-digit unemployment rate in excess of 10% to 8%-9%, recently.

France joined 10 other European Union countries in adopting the euro as its currency in January 1999. Henceforth, monetary policy will be set by the European Central Bank in Frankfurt.

Despite significant reform and privatization over the past 15 years, the government continues to control a large share of economic activity: Government spending, at 53% of GDP in 2000, is the highest in the G-7.

Regulation of labor and product markets is pervasive. The government continues to own shares in corporations in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications.

Current issues

The conservative governments of Jean-Pierre Raffarin, since Raffarin’s first nomination in 2002, have had to face increasing budget deficits for the State and Social Security.

The government and its supporters contend that longer-term prospects of the economy impose that the retirement age should be raised, unemployment and retirement benefits should be cut, and that the national health insurance regimes should be reformed to cut costs.

Opponents, mostly from left-wing parties but also, to a lesser extend, from the Union for French Democracy (a centrist party in Raffarin’s coalition), contend that the proposed reforms are not good for the country and thus rightly opposed by the population.

According to them, Raffarin’s reforms and spending choices hit hard on working-class people and those preparing the future of the country, such as scientific researchers, while the government squanders public money on special interests through aids and tax cuts.

In March 2004, the regional elections were a severe blow to Raffarin.

The government has since announced that the reforms would be reexamined to heed the concerns expressed by the population, though it is still unclear what it intends to do.

Workforce and social relations

Working Hours

Legislation passed in 1998 shortened the legal workweek from 39 to 35 hours effective January 1, 2000. A key objective of the legislation is to encourage job creation, for which significant new subsidies will be made available.

It is difficult to assess the impact of workweek reduction on growth and jobs since many of the key economic parameters, such as the impact on labor costs and company’s ability to reorganize work schedules, will depend on the outcome of labor-management negotiations which should extend through 2000 and beyond.

The conservative government of Jean-Pierre Raffarin is trying as of 2004 to enact more exemptions from this law.

Unions and strikes

Membership in France’s labor unions accounts for less than 10% of the private sector workforce and is concentrated in the education, manufacturing, transportation, and heavy industry sectors.

Most unions are affiliated with one of the competing national federations, the largest and most powerful of which are the CGT, FO, and CFDT.

Contrary to some popular misconceptions, French unions are fairly weak in general, and strikes are uncommon in most of the economy see France: a nation of strikers?
On the other hand, unions are powerful in some parts of the public sector. This is especially true of public transportation (SNCF national railways, RATP Paris transit authority, air traffic control…), where strikes have an instant effect on the general public and attract the attention of the foreign press.

In the case of the private sector, the weakness of the unions often leads to their calling for the government to intervene in workforce conflicts.

Another issue is that unions compete between themselves; this occasionally leads to power struggles in some areas where they are powerful, even degenerating into strikes.

Sectors of the economy

Agriculture

France is the European Union’s leading agricultural producer, accounting for about one-third of all agricultural land within the EU.

Northern France is characterized by large wheat farms. Dairy products, pork, poultry, and apple production are concentrated in the western region.

Beef production is located in central France, while the production of fruits, vegetables, and wine ranges from central to southern France.

France is a large producer of many agricultural products and is currently expanding its forestry and fishery industries.

The implementation of the Common Agricultural Policy (CAP) and the Uruguay Round of the GATT Agreement have resulted in reforms in the agricultural sector of the economy.

France is the world’s sixth-largest agricultural producer and the second-largest agricultural exporter, after the United States.

However, the destination of 70% of its exports are other EU member states. Wheat, beef, pork, poultry, and dairy products are the principal exports.

The United States, although the second-largest exporter to France, faces stiff competition from domestic production, other EU member states, and other third countries.

U.S. agricultural exports to France, totaling some $600 million annually, consist primarily of soybeans and products, feeds and fodders, seafood, and consumer oriented products, especially snack foods and nuts.

French exports to the United States are mainly cheese, processed products and wine. They amount to more than $900 million annually.