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How attractive is France’s investment environment?
The French-American Chamber of Commerce (FACC) posted the following summary of a report recently carried out by consulting and accounting firm KPMG.
The full report is available here, entitled “Facts & Figures on France’s Investment Attractiveness”.
Probably a good idea to check out other resources as well.
There is an interesting report by The Economist in their “The World in 2013″ edition that highlights the likely challenges facing President Hollande’s administration in the next year including the difficulty in encouraging business growth and more investment.
While France remains a country that retains an attractive profile, there is a real risk that increasing taxes and a morose business climate could take hold and hamper growth in 2013. So although France has a lot to offer, it must make progress to improve the business climate and decrease unemployment. It’s not an easy time for Europe, and France will not be an exception. But as the adage goes, “no pain, no gain”.
From: Invest in France Agency
In the competition with other European countries to attract inward investment projects, France boasts a number of key strengths underpinning its investment attractiveness.
These advantages include:
- A large, dynamic market in Europe.
- A skilled, productive workforce.
- Recognized support to foster innovation.
- A plentiful supply of commercial real estate.
- Dense, high-quality transport infrastructure.
- High-quality energy and telecommunications at competitive rates.
- Renowned quality of life.According to KPMG’s “Competitive Alternatives” biennial guide to business costs in over 100 cities in nine different countries, France stands out for having particularly attractive business setup costs, comprising labor costs, facility costs, transport, utility costs (electricity, natural gas, telecommunications) and corporate tax. In the 2012 edition, France was ranked fourth among the countries compared, up two places from sixth in the previous rankings (2010).
The Economist’s France 14-page special report
The Economist this week has a 14-page special report this week in its print edition that focuses on France, from its economy to politics, under the central theme of how economic structural reform is necessary in order to avoid a “time bomb” going off at the heart of the Eurozone. You can access the Nov. 17, 2012 print edition contents here. The leader article introducing the special report is here, and the special report link can be found at the table of contents site under “Special report: France” (there are 8 articles).
I’m delving into all this right now and encourage you to do the same. Even if you don’t agree with the magazine’s analysis, it is a highly-regarded publication for a reason: for asking important questions.
This is the not the first time the British news magazine has waxed poetic about France’s economic woes and potential for growth. Indeed, French economic and business paper Les Echos puts past covers and stories into perspective (in French).
What do you think are France’s biggest problems and do you think Hollande and Ayrault’s government can solve them?
French news: Eurozone crisis, Socialists and Islam
I wrote up a piece for Bonjour Paris covering this diverse topics. You can read the article here.
How Europe is responding to the fiscal crisis
I have an article in the latest edition of Bonjour Paris about the European fiscal crisis, French-German talks and world market instability which you can read here.
Will France be the next market downgrade?
As most of you have seen in recent days, world stock markets have been manic depressive, going through ups and mostly downs due in large part to widespread worries that the US debt downgrade from S&P and the fiscal debt in countries such as Greece, Italy, and Spain will result in worse market conditions for investors.
My other sovereign’s an AAA (The Economist)
There was a market backlash against French debt and enormous market losses for French banks like Société Générale, BNP Paribas and Crédit Agricole (exposed to Greek debt and other European sovereign debt) that is making investors increasingly anxious about France’s debt. Indeed as The Economist writes:
“France’s debt stood at 82% of GDP last year, from 64% in 2007. This is one of the highest of any AAA-rated country. That, investors fear, means it could be the next target for a downgrade, especially if already anaemic economic growth falters further. The extra yield required by investors to hold French debt instead of German Bunds jumped to almost triple the average level of 2010 while the cost of insuring against a default by France reached new highs during the week.”
Moreover, as The Telegraph writes, “French banks have €410bn (£360bn) of exposure to Italy alone according to the Bank for International Settlements. The twin crises in France and Italy are now intimately linked and appear to be feeding on each other.”
How will France proceed? According to a great, in-depth Bloomberg interview (embedding not allowed) with Philippe D’Arvisenet, global chief economist at BNP Paribas SA, France initiating austerity measures is “inescapable”. They go on to discuss France’s exposure to European sovereign debt, reform plans to cut spending but keep tax rates at current levels (though with elimination of some 500 tax loopholes).
The same Telegraph article states, “French president Nicolas Sarkozy has ordered a “general mobilization” to slash France’s budget deficit in a frantic effort to safeguard the country’s AAA rating and head off a downgrade by Standard & Poor’s.”
We will see how this plays out…for now, the markets will likely continue to be manic depressive. Hang on tight!
I leave you with this passage from the Telegraph article:
“…Marchel Alexandrivich from Jefferies Fixed Income said investors are worried that the latest contagion to France could bring the eurozone’s bubbling problems to a head in a dramatic fashion.
“If France is dragged into the problem, then we will hit crisis point. They will either have to move to a full-blown eurobond — and German politicians are set against that — or face a break-up. There is a significant chance that the euro will no longer exist in its current form within twelve months,” he said.
President Sarkozy said France would include a “golden rule” in its constitution to restore fiscal probity, adding that the fiscal targets for 2011 and 2012 were “untouchable”.The new budget measures will be introduced on August 24 and are expected to include the closure of 500 tax loopholes.
The IMF said France has the highest debt ratio of any AAA state this year at 85pc of GDP and may have to tighten further next year. Like the US, France has also built up huge pension debt and contingent liabilities.”
Comparing the Europe and US debt crises
The Economist has an insightful commentary on both debt crises. Excerpt below.
Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem,” Mr Rachman writes. I have some quibbles about the way he frames the economic issues as a generalised problem of “an unsustainable and dangerous boom in credit”, viz homeowner credit in America and the overdrawn borrowing of Greece and Italy in Europe. This seems to smooth over a lot of differences a bit too easily; the American housing bubble was fueled by CDOs, but the economic problems in Europe aren’t about an asset bubble caused by Greek or Italian government borrowing, and to the extent that the problems are due not to asset bubbles but to financial interconnectedness, the interconnectedness caused by private-sector issuance of CDOs and CDSs isn’t really the same as the interconnectedness caused by the adoption of the euro across 17 countries.
Christine Lagarde elected head of IMF: American reaction
BBC/AFP: Christine Lagarde will start her five-year term at the IMF on 5 July
As former French Finance Minister has been named IMF head, effective July 5th, and François Baroin has been named her replacement, Le Figaro has an interesting article on Christine Lagarde from an American perspective, as well as a longer article into her path that lead her to Washington.
Meanwhile, she appeared in 2009 on the Daily Show with Jon Stewart. Check it out here.
French finance minister Christine Lagarde tapped for IMF job
In the wake of the DSK scandal (Dominique Strauss-Kahn), there is plenty of competition to replace him as IMF Director. French finance Minister Christine Lagarde is considered the favorite for the position, but there is debate whether or not a European should continue to be director (as has been the case since 1944, the founding of the IMF), or if an expert from an emerging economy should take the position. In any case, Lagarde just officially announced her candidacy for the position.
As is noted in the French press, the US is hesitating to give Lagarde its support since it might want to see an emerging economy director instead. The debate will continue.
She has vast experience, expertise, knowledge and was Chairman at a top firm (Baker & McKenzie) in the US, based in Chicago. She was even a guest in 2009 on Jon Stewart’s The Daily Show. Watch here.
Michael
americanexpatinfrance
