France has the third largest economy in Europe. There has been a financial downturn around the world, but the other European countries like Germany and UK have recovered from the dreadful situation. France, on the other hand, has been slow at recovery. Here are the biggest financial challenges France is facing today.
Low GDP growth
The GDP growth of France is low compared to the other European countries. The GDP growth has been 1.2% in 2016 and 1.4% in 2017. But Germany and UK had a GDP growth of 1.8%. France is a dual labor market for which the growth of living standard has been low. The insiders are getting highly paid with benefits; whereas, the youngers are getting low paid short-term jobs. It is expensive to hire employees and to lay them off as well. The laying off procedures must be simplified. About 70% of the country’s economy is dependent on the service sector, like tourism and entertainment. But these sectors are not as productive as the manufacturing sectors. So, lack of innovation in the manufacturing sector contributes to the slow GDP growth of the country.
The unemployment rate is high in France. The rate is now 10% which is higher than the eurozone average. Almost double number of people are jobless in France compared to UK and Germany. The unemployment rate is high among the young people. 24% of people between the ages of 15 to 24 are jobless. The government debt is now 90% of GDP; whereas, it was only 58% ten years ago.
More social spending
France has a very generous welfare system. As a result, the social spending has increased. There are pensions and other benefits for the public and private sector employees. The healthcare system now needs more money. The public spending must be brought under control; otherwise, France won’t be able to get out of its debt problem. The government has to work under very strict budget and if the social spending is reduced, the situation can get better.
The labor market of France should be reformed and the public spending must be reduced in order to come out of these financial challenges that France is facing today. Other European countries like Germany and the UK are in a better financial position than France right now according to the GDP growth and unemployment rate. The deficit in the annual budget must be overcome and the French government must undergo some reforms in order to improve the country’s economic situation.