http://www.theglobeandmail.com/servlet/story/RTGAM.20090416.wfranceeconomy0416/BNStory/crashandrecovery/home
Summary
This article talks about the fact that most European countries were hit hard by the recession. However, France was one of the countries that were able to dodge the severe damage done to most of the other countries. However, this does not mean that France was not harmed by the recession at all. As a matter of fact, the country is urging the President Nicholas Sarkozy to make structural reforms to make the economy more dynamic. Although France’s GDP dropped by 1.2 percent, it wasn’t as bad as Germany’s drop of 2.2 percent and 1.4 percent drop in Britain. Even though France is in better shape, it seems as though Germany will recover at the same rate as France by 2010. Moreover, Germany and Britain were expected to recover faster than France in the long-run. This is because France has Disinflation and the rigid wage structure, which makes it hard to adjust the salaries. Moreover, the laws in France make it hard for businesses to fire workers which isn’t a good sign in an economic downturn. Also, house prices in France had increased by a lot before the recession unlike the prices in Britain and Germany. In other words, the consumers owning property in Britain and Germany wouldn’t be hit as hard. Overall, France is in good shape at the moment, but in the long run, France will recover at a slower rate compared to countries such as Britain and Germany.
Connections
Since this chapter is all about the Stabilization Policy, this chapter can tell us why France was able to do so well to avoid severe damage to the economy during the recession. The government had planned to take many steps with their stabilization policy. One thing that they have decided to do is to make labour contracts more flexible, as well as making the laws less strict so then the employers are more comfortable with hiring new workers. Also, the government has considered dropping prices so people would feel richer; thus, they would spend more money making the economy better. As a matter of fact, people’s wages in France are expected to rise by the end of this year, which once again makes people feel wealthier. Also, Costly social charges, which help consumers during the downturn, discourage companies from hiring. Although we are in a recession, France has planned ahead in order to pull their country out of the recession as soon as possible.
Personal Reflection
I agree that there are many policies that need to be changed in France. I believe the one that is the most damaging to the French economy is the fact that employers are afraid to hire people because of the strict policies. The government should be more lenient with that policy. If employers are afraid to hire people, that would create a higher unemployment rate. Thus, they would not be able to get out of the recession as fast as everyone else. However, it is a relief to see that the government is planning to do that by the end of this year. Since France wasn’t hit as hard by this recession, I believe that they will be able to change the laws a bit and get back on track to get out of this recession
