How France Became the EU’s Lone Economic ‘Bright Spot’

October 31, 2019, 11:01 AM UTC
FRANCE-POLITICS-SOCIAL A man holds up a yellow vest in front of the Arc de Triomphe on the Champs Elysees avenue during an anti-government demonstration called by the "yellow vest" (gilets jaunes) movement, on September 21, 2019 in Paris. - The yellow vest (gilets jaunes) protests, which often descended into violent clashes with the police, erupted last November, with demonstrators accusing French President of being aloof and unaware of the needs of ordinary French people. (Photo by Lucas BARIOULET / AFP) (Photo credit should read LUCAS BARIOULET/AFP/Getty Images)

Across the European Union’s major economies, the last quarter was not a pretty one. It’s likely that Germany officially entered a recession, Italy continued to struggle to avoid a recession, and the U.K.—still part of the EU, though exhausted by preparations for Brexit—could only be relieved that the third quarter was not quite as dismal as the second.

The only exception—it seems—was France, the single “bright spot” among the EU’s economies, according to a report from the Economist‘s Intelligence Unit, which on Wednesday painted an underwhelming picture of Europe’s economic state.

“Things have really slowed down this year, and to be honest, this is a slowdown that started at the end of last year,” when trade worries began to grow, said Emily Mansfield, principal economist for Europe at the EIU. That’s due to a “whole range of mostly external factors.”

The U.S.-China trade war, slowing growth in China, and ongoing uncertainty over the EU’s trade relationship with the U.S. have proved to be powerful headwinds for countries that have relatively strong domestic economies. Those forces have hit export-driven economies—particularly Germany, which relies heavily on sending goods to China and the U.S.—the hardest, Mansfield said. (The U.K. doesn’t fit perfectly into this trend since it has internal problems too; three years of Brexit uncertainty have produced a unique blend of economic malaise: it is expected to post a 0.10% gain in Q3, the EIU said, up from a drop of 0.22% in Q2.)

Meanwhile, in France, “things are actually looking pretty good,” said Mansfield.

France grew by 0.3% in the third quarter year-over-year, the country’s official statistics office said Wednesday, making it likely the fastest-growing major economy in the bloc, according to EIU estimates. Official figures from several major countries, including Germany, are still forthcoming.

The French economy has benefitted from depending heavily on the service industry, Mansfield said, which has insulated it somewhat from global trade jitters. Economic reform policies by President Emmanuel Macron—while controversial within France—have also increased hiring, she said.

And while France’s growth looks particularly strong compared to the grim mood over the border in Germany, Mansfield noted that for an economy of its size, its pace of growth is decent even apart from its peers.

“It does look good in the current context,” she said. But, “realistically, it’s a highly-advanced economy, and it’s hard for economies that are that rich in the first place to expand.”

Meanwhile, while the U.S. is forecast to grow by 0.4% in the third quarter, the EIU noted that the American economy is “showing signs of strain,” with consumer sentiment undercut by the trade tariffs and the manufacturing sector feeling the pressure of rising import prices and weakening demand in markets like China and the EU.

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