Will one of the Eurozone superpowers sink the listing ship?

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A recent headline article in “The Economist” highlighted the precarious and deteriorating state of the French economy, thereby debunking the popular myth that France is one of the Eurozone’s safer ports. The following stats give plenty of food for thought:

  • The bloated public sector now accounts for over half of GDP;
  • Public debt is heading towards the whole of GDP;
  • Current account deficit close to 100m euros;
  • Share of exports to other Eurozone states less than Holland which has a quarter of France’s population;
  • Average pay rates higher than Germany’s although productivity rates are much lower;
  • Growth of only 0.2% in last quarter and likely to deteriorate this quarter; and
  • Recently downgraded credit rating.

Staying in the Eurozone will increase the pressure on France’s economy as it cannot benefit from a depreciating currency and lower pay rates. The new French President’s intention to increase tax on higher earners, to help balance the books, is likely to fail as it will dis-incentivise those people and encourage them to look abroad for a fairer working environment, so net income tax receipts are unlikely to increase.

2012 was the year that Portugal, Italy, Greece and Spain were under the Eurozone spotlight. Could 2013 be the year when France becomes the bête noire that finally sinks the listing Eurozone ship?

This is exactly the kind of senitment that moves markets and as such regular reviews of investment and pension portfolios to reduce risk are essential. Good financial advice alongside a regularly reviewed financial plan is always worthwhile.

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