3 Huge Problems With France's Economy

By Justin Loiseau | More Articles | Save For Later February 1, 2014 | Comments ( !

Paris is the city of lights and France is the land of love. But lights and love don't make money, and France's economy has hit increasingly hard times in the past few years. Here's why. 1. Not-so-unified European Union

Source Flickr, !oti"ua. #uropean $nion Parliament Head"uarters in Brussels, Belgium. .

%he #uropean $nion &egan as a steel and coal agreement in the '()*s ++ and perhaps it should've stayed that way. ,espite aspirations of economic prosperity, cultural preservation, and never+&efore+ seen international synergy, the #uropean $nion has lately &een more headache than help. For an economically strong country like -ermany, the #uropean $nion has &een a thorn in its side. .nd for nations with weaker economies like France, -reece, and /taly, the $nion isn't helping, either. -ermany's strength keeps the euro pricier than France prefers, which hurts e0port opportunities. /n its latest #uro1one manufacturing re"ort earlier in 2anuary, !arkit 3hief #conomist 3hris 4illiamson noted France is seeing a steepening downturn, in part the result of widening export losses. This suggests that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.

Slower e0ports mean slower &usiness, which in turn affects all aspects of France's economy. .lthough the French still lay claim to the second+largest economy in the #uro1one, manufacturing hit a si0+month low in ,ecem&er. %he country's unemployment rate has hovered around '*.56 over the last year, more than twice as high as -ermany's. 2. Regulation

Source 4ikimedia 3ommons, -aritan. France President Francois Hollande of the Socialist Party.

,espite its history of revolutions filled with cries for freedom, French love regulation. %he country thrives on controlled chaos, and rules are a must for a society that flourishes on &ending them. 7egulation comes part and parcel with #$ mem&ership, and France's own regulation tops most. %he nation's goals are lauda&le environmental protection, high health and safety standards, support for local &usinesses, and social safety nets for marginali1ed citi1ens. But President Francois Hollande of the Socialist Party may &e taking things too far. His wealth redistri&ution plans include a 8millionaire ta08 which tacks a 9)6 levy on salaries e0ceeding ' million euros ++ a move that has &een met with ferocious &acklash &y everyone from movie megastar -:rard ,epardieu to ;avier <iel, the so+called 8Steve 2o&s8 of France . But it's not =ust the millionaires getting mangled. . recent re"ort looked at an artificial &arrier to growth for small companies considering e0panding &eyond )* workers. Since 8a tsunami8 of la&or laws hit &usinesses when they hire their )*t# employee, some choose to stay smaller to avoid forming work councils, increasing union representation, etc, according to the write+up &y economists.

4hile that might mean &etter conditions for those with work, France's (*6 union mem&ership rate already takes care of most of its citi1ens. So instead, France's economy misses out on supporting small &usinesses, increasing employment, and improving productivity. %he economists' rough estimation of lost opportunity clocks in at a whopping >6 to )6 of France's economy ++ around ?''5 &illion. 3. Culture Shock

Source 4ikimedia 3ommons, 7aphael -oetter. !etro worker strikes leave commuters stranded in @**9.

%he French are =ust as hardworking as others ++ &ut their country has undergone significant change that puts many cultural traditions at odds with economic sustaina&ility and prosperity. 4hen France introduced a A)+hour workweek limit in @***, other countries regarded the decision with a mi0 of astonishment, disdain, and perhaps even =ealousy. But what was made law &y li&erals hasn't had its intended effect ++ instead of promoting more employment, the rule has mostly allowed workers in France's economy to claim overtime on their average A(.) hours of work a week, according to @*'' num&ers Bmost recent dataC. But even with overtime, not everyone's happy to u&i"uitously e0pand employment. %he French are infamous for their 8grDves,8 when workers strike &y the thousands Bor hundreds of thousandsC to demand more work, &etter work, or &etter paid work. %he practice periodically shuts down airports, trains, and pu&lic services of all sorts. /t's such a common occurrence that Yahoo! Finance's French page has an entire section devoted entirely to the coverage of the latest grDves.

4hile employers may appreciate the joie de vivre that their French workers emulate, corporations are understanda&ly hesitant to open up shop in a fickle+minded France. he fallac! of "rance#s econo$! %he French have made emotional economic decisions &efore. From guillotining its upper class to selling Eouisiana to the $.S. for less than three cents per acre, the country has had a haywire history. %he challenges it faces today are unlike any it's ever seen &efore, and it's going to take more than a glass of Burgundy to make these three pro&lems disappear. For the first time since the early days of this country, weFre in a position to dominate the glo&al manufacturing landscape thanks to a sin$le, revolutionary tec#nolo$y% &' "rintin$. .lthough this sounds like something out of a science fiction novel, the success of A, printing is already a foregone conclusion to many manufacturers around the world. %he trick now is to identify the companies ++ and there&y the stocks ++ that will prevail in the &attle for market share Fool contributor Justin Loiseau has no position in any stocks mentioned. The Motley Fool recommends Yahoo!. Try any of our Foolish newsletter services free for ! days. "e Fools may not all hold the same opinions# but we all believe that considerin$ a diverse ran$e of insi$hts makes us better investors. The Motley Fool has a disclosure policy.