Although France is generally regarded as one of Europe’s stronger economies, the loss of its AAA rating would be devastating to European efforts to build a firewall that would prevent contagion from spreading through the EU banking system.
But France also has bigger problems than just its credit rating. Fitch recently said France was the AAA country with the most exposure to Europe’s debt crisis.
In ten years, France’s exports have fallen from 55% of Germany’s exports to barely 40%. Labor productivity has fallen three times in the last four years.
France’s gross public debt amounts to some €1.7 trillion ($2.3 trillion), or 87.4% of GDP. That’s the highest ratio of debt-to-GDP of any AAA-rated country in the euro area.
And its government is doing little to curb its deficit.
France passed its last balanced budget in 1974.
With growth slowing, it is already going to have trouble adhering to EU rules to bring its budget deficit under 3% by 2013.
High costs of employing workers makes doing business expensive — particularly in comparison to neighboring Germany.
Where German employers pay 29% of gross wages in taxes, French employers pay as much as 49%. A 35-hour work week also makes employees expensive.
And the Democrats want the USA to be more like this??
Hmmm, this can’t be good for the market.