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France fluctuations throughout the crisis than other developed countries. Compared to other developed countries, France in the global economic crisis relatively well. In 2008-2009, the decline in real GDP growth in France than in other developed countries is small, the unemployment rate does not appear sharp increase. France in the post-crisis recovery is slow, the first half of 2011, output growth and employment is still not restored to pre-crisis levels.
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contribution to economic growth will subside. First, the inventory adjustment cycle near the end. Second, with the rapid deterioration of business conditions, the equipment utilization rate has begun to decline, fixed capital formation is also slowing down. These will be investment in the downward pressure. Finally, with the financial institutions under pressure to implement the deleveraging, the available credit may also be to tighten in the near future. This will make a viable project financing difficulties.
Economic Outlook
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French banks need to raise capital as soon as possible, in order to boost investor confidence. The end of October, the euro-zone summit decided to bank a core capital ratio to more than 9 percent in June 2012. For the four banks accounted for 80% of the French banking system (BNP Paribas Group BPCE, agricultural credit and SG), estimated its capital shortfall of 8.8 billion euros. Although some 8.8 billion euros to build a firewall against the debt crisis of the French bank, too little, but even so, how to raise the € 8.8 billion is still a big challenge, especially in adverse market conditions . A more likely outcome is that the banks by the credit crunch to reduce the size of the balance sheet. If the banks are doing so, that French private sector will face severe credit constraints, and thus a drag on economic growth.
However, the indications are that the recovery has been weakened. Due to the weakening of fiscal stimulus and some temporary factors (such as mild climate affect the energy consumption), private consumption in the second quarter of this year than the first quarter, shrinking 0.6 percent. The decline in foreign demand for imports in the second quarter, the increase in net exports turned negative and positive. Due to the reduction of the euro area external demand, exports almost stagnated.
weak labor market will constrain the growth of private consumption. Summer the euro zone debt crisis intensifies this year seriously weakened business confidence, the sentiment index fell from 109 in March to September 97 (mean = 100). The investment slowdown as scheduled new employee decision-making that may affect the enterprise. France's unemployment rate, especially because the rigidity of the labor market means that adjustment is likely to be through the cessation of employment, rather than lower wages. The high labor taxes and high minimum wages also reduced employment opportunities for all market segments. The recent reform of the pension system can help older workers' employment, the rise in the number of subsidized As of the end of 2011 also inhibited the rise in unemployment. In short, it is expected that the 2012 French unemployment rate rose slightly to just over 10% level. The bleak labor market will slow down private consumption. We expect private consumption growth from 2011 of 0.7% slowed to 0.4 percent in 2012.
To ensure that the AAA credit rating, the French government has introduced a series of budget reforms. However, these measures may affect economic growth, and increase the negative market sentiment. In the 2011 budget, the French government plans to cut the overall budget deficit to 5.75 percent of GDP (7.1%) in the previous year. The government also made a New Year's Eve financial plan is expected in the 2011-13 year amounted to GDP2.8% of the adjustment measures. Business confidence in the rapid deterioration in a referendum on abortion after Greece, the French government bond yields and CDS spreads also will be a sharp rise. The Government announced a 7 billion euros of additional austerity plan on the basis of 10 billion euros announced in August, hoping to keep the French debt levels are no longer rising. The French government preventive approach has been widely recognized by investors, but these are the medium and long term measures. If the French banking system requires large-scale relief, or EFSF suffered significant losses, the French debt to GDP ratio will be a sharp rise, threatening France's AAA rating. France lost its AAA rating, the EFSF may also have to raise interest rates. President it would be Sarkozy and Merkel Prime Minister to ensure the effectiveness of the launch of a complex package of assistance programs has been questioned. Moreover, the tightening of fiscal policy may have a short-term negative impact on economic growth. When growth slows, consumer and business confidence will worsen World Steel Pipe News , and the resulting negative feedback loop that may spread to other parts of the world.
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the main driver of economic recovery from the growth of domestic demand. The initial economic rebound by the stock a substantial increase in support. In the fourth quarter of 2009, the inventory of real GDP growth contribution of almost one percentage point, and since then, domestic demand began to pick up the background of the fiscal stimulus, especially the strong growth in private consumption. For example, to the end of 2010, before the expiration of the scrappage scheme to obtain tax rebates, consumers are buying large quantities of new cars, the cars of new orders increased significantly.
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crisis or liabilities increase sparked worries about the financial vulnerability. During the global financial crisis, the French government public intervention in the banking sector (including the injection of funds, and the size of the secured bank debt and rescue impaired assets) reached 4.2 percent of GDP. To stimulate the economy coupled with the crisis led to a substantial fiscal spending increase and a decrease in government revenue, the French government's debt levels were significantly higher for the European countries in the 10 AAA ratings. Including EFSF's commitment to France's total debt has more than 90% of GDP. Standard & Poor's to downgrade the debt of the United States to reach this level was.
French bank exposure to the neighboring countries is very high, and highly dependent on wholesale funding markets, which makes the French banking system is particularly vulnerable. After the establishment of the euro area in 1999, the European financial system between infiltration and exposure between countries significantly expanded. Due to low capital costs of the national debt and zero currency risk, the major European bank holdings of government bonds positions. It can be seen in the major European economies, the Bank of France, Greece, Ireland, Portugal, Italy and Spain, the risk of exposure to the highest, reaching 600 billion euros. Some French banks have suffered losses in the process of reduction in mind 50% of Greek government bonds and held similar impairment charges on the national debt of Italy and Spain, will also have a French bank's balance sheet to have a significant negative impact. At the same time, the French bank's funds from owe the stability of the wholesale finance market. When the rise of the market counterparty risk, the Bank of France from the market more and more difficult to raise funds. In related news, the U.S. money market funds has been reduced from the start in July on European banks, especially the exposure of French banks. In this context, the French bank's liquidity risk is worrisome. ECB open market operations to provide unlimited liquidity to ease market liquidity pressures in the short term, but as long as banks do not want to each other in the unsecured market borrowing, that the ECB's liquidity measures results will be limited.
(b) the risk of the financial system
(a) the risk of the banking system
November 21, CICC chief economist Peng Wensheng, the French Economic and Financial Market Outlook Brief Review. He believes that the French economic fluctuations in the debt crisis in Europe is smaller than in other developed countries World Pipe network informed, the main driving force of economic recovery from the growth of domestic demand, but the indications are that the French economic recovery is weakening.
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foreign demand is unlikely to offset the impact of weak domestic demand. A steady increase in labor costs in the past few years, France has lost some of the external competitiveness. Therefore, the share of net exports to economic growth also declined. Forward-looking view, the weakness in domestic demand may affect imports. French exports will be reduced due to the global economic slowdown. On the whole, net exports are unlikely to provide economic growth requires the kinetic energy.
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