France is facing economic uncertainty following the ousting of Prime Minister Michel Barnier’s government after a no-confidence vote. The number of bankruptcies in France is increasing, with some experts warning of a potential financial crisis despite relatively stable economic indicators.
France is facing economic uncertainty following the ousting of Prime Minister Michel Barnier’s government after a no-confidence vote. The move has raised concerns about the country’s ability to implement a deficit-reduction plan and steer its economy into calmer waters.
The number of bankruptcies in France is increasing, with Philippe Druon, a bankruptcy and restructuring lawyer at Paris-based law office Hogan Lovells, confirming that investors are cautious. “It’s very difficult to find buyers for companies that have gone into administration,” he said. The number of bankruptcies is as high as it was during the 2008 financial crisis.
Rising bond yields and a spate of bankruptcies are making investors nervous, with some experts warning of a potential economic storm. Christopher Dembik, an investment advisor at the Paris subsidiary of Swiss-based Pictet Asset Management, has a different view, saying that it’s exaggerated to say France is on the brink of a financial crisis.
Despite relatively stable economic indicators, such as French GDP growth and low unemployment, some experts believe that the French economy has weakened over the past few years. Denis Ferrand, head of Paris-based economic research institute Rexecode, puts this down to years of high inflation, rising interest rates, and soaring energy prices.
A quarterly survey amongst bosses of 1,000 French small and medium-sized companies showed that only 36% were planning to maintain their investments in October, while 45% said they’d postpone them and 18% wanted to cancel them. A mid-November survey by UK consultancy Ernest & Young (EY) among 200 international company bosses yielded similar results.
The French economy faces several challenges, including high inflation, rising interest rates, and soaring energy prices. According to Ferrand, these factors have led to a decline in competitiveness for French companies compared to their Chinese rivals. “French and European companies have become less competitive with Chinese ones, as our production costs have risen by 25% since 2019,” he said.
Despite the challenges facing the French economy, some investors remain confident. Managers of US investment funds have already taken into account France’s political risk in their calculations, according to Dembik. However, Ferrand warns that investor confidence is fragile and can be easily shaken by economic uncertainty.
The future of the French economy remains uncertain, with experts warning of a potential financial crisis. While some investors remain confident, others are more cautious, highlighting the need for the government to implement a clear plan to address the country’s economic challenges.
