French Economy Starts to Fall Apart

France's National Institute of Statistics and Economic Studies (Insee) reported that the country's unemployment rate reached a 13-year high in the second quarter, and that does not include a group often discussed when U.S. jobless figures are analyzed - people who may not be actively seeking work. The debate in France will turn more forcefully to whether the government should spend money to reverse the trend, but that conversation is already months old, and no resolution is likely despite the new, depressing numbers.

Insee's data:

In Q2 2012, the average ILO unemployment rate in metropolitan France and overseas departments stood at 10.2% of the active population.

In metropolitan France only, with 2.8 million unemployed people, 9.7% of the active population was unemployed, as well for men and women. The unemployment rate increased by 0.1 point q-o-q after an increase of 0.2 in Q4 2011. It is as high as in 1999.

More generally, in metropolitan France, 3.5 million people did not work but would like to work, whether they are available or not for work within two weeks, or whether they look actively for a job or not.

France does not have any more money for stimulus than the United States does, relative to its size. Or, probably more accurately, its leaders do not have the power among political fighting to put tens of billions of dollars into stimulus. America's gross domestic product (nominal) is nearly five-and-a-half times France's. If the European nation wanted to match the U.S. stimulus plan of three years ago, it would need to set aside over $150 billion. Even though French president François Gérard Georges Nicolas Hollande has pressed for stimulus over austerity for many of the eurozone's weakest nations financially, it does not mean he can get the majority of members of the French National Assembly to earmark funds that are so extremely high.

Hollande may end up being unable to convince his own countrymen of what he has supported throughout Europe - that investment via stimulus is the single most likely path to lower unemployment. The notion probably would be rejected by French voters because it almost certainly means higher taxes and a widened deficit. Unlike its weaker neighbors, France will not get aid from outside, no matter how painful its actions might have to be if it wants to add jobs.

Douglas A. McIntyre

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