Global Futures: Focus on France

The campaign message from Nicolas Sarkozy was that France would have to 'work more to earn more'. And with France suffering from employment rates towards the bottom of the EU league table and economic growth again lagging behind the rest of the eurozone, the new government is betting that longer working hours will do the trick. But in France's case increasing the economy's performance must also involve putting more people to work.

Employment levels in France are among the lowest in the eurozone. Only 63 per cent of the working-age population was employed last year, a rate that was bettered by every eurozone country except Belgium, Greece, and Italy. The proportion of people in employment in France is particularly weak among women, the young (aged 15-24) and those over 50. Only half of those aged 50-64 currently work. Indeed, it takes the highest productivity levels in the EU for France to sustain output at current levels.

Experian has examined the French labour market and modelled the economic impact of the pension reforms that will bring more older people into the workforce, boosting the potential GDP growth to 2.5 per cent per year. This scenario results in the employment rate for the 50-59 age group rising from 67 per cent today to 77 per cent in 2012, and from 14 per cent to 21 per cent for those age 60-64.

To achieve these employment rates, however, trade unions and employers would have to agree to substantial acceleration in pension reform. A planned rise in the number of years of service needed to qualify for a full pension to 41¾ years would have to be brought forward from 2020 to 2012; current plans see rises to 40 years in 2008, and 41 years in 2012. This acceleration may be a bridge too far even for Mr Sarkozy, who is keenly aware of the political ramifications, especially as he heads for an election in 2012. If France is to grow faster, then it looks like it will have to involve more than pension reform.

Our international economics team produces macroeconomic forecasts and analysis for 40 countries, covering 85 per cent of global GDP. Global Futures, published four times a year, comprises a ten-page report for each country, a database containing historical data and ten-year forecasts, and a 'stress-testing' report that outlines the key risks to global growth and the implications these have for individual countries.

For further information please contact Matthew Sherwood on 0207 746 8234, or email matthew.sherwood@uk.experian.com.

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