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An overview of the economic performance of france and the issues of taxation

In manufacturing, France is one of the global leaders in the automotive, aerospace and railway sectors as well as in cosmetics and luxury goods. Furthermore, France has a highly educated labor force and the highest number of science graduates per thousand workers in Europe. Additionally, France is the most visited country in the world, making tourism a prominent sector in the economy.

Compared to its peers, the French economy endured the economic crisis relatively well. However, recovery has been rather slow and high unemployment rates, especially among youth, remain a growing concern for policymakers. After the start of the crisis the economy stagnated and the country has had to face several economic challenges.

Government tax revenue has dwindled and consumer purchasing power has declined.

  1. Additionally, France is the most visited country in the world, making tourism a prominent sector in the economy.
  2. After the start of the crisis the economy stagnated and the country has had to face several economic challenges.
  3. Among goods, many agricultural products are protected at the European level, a policy that France advocated, and French farmers have historically been dependent on government subsidies.

Policy makers have attempted to modernize the economy; however, this has been a difficult process. The former Sarkozy government became deeply unpopular, partially due to its reform agenda. The state took control of certain key industries, including transportation, energy and communications, and set up a planning agency to regulate economic activity.

In addition, De Gaulle began the construction of a welfare state in France and established key institutions such as social security and works councils that remain today. The government began retreating from direct economic intervention, privatizing some state companies and adopting more market-orientated policies. Throughout this time period, the French government, along with principal trade partner Germany, advocated increased European economic integration.

Further, France was one of the first countries to adopt the euro and the French economy remains highly integrated with Europe today. In recent years, France, similar to many European nations, has experienced stagnating growth and fiscal challenges.

Under former President Sarkozy, the country implemented austerity measures to tackle the budget deficit and public debt. To reinvigorate the French economy, current President Hollande faces the task of cutting public spending while spurring job creation.

Balance of payments Since 2005, France has maintained a current account deficit, predominantly driven by trade in goods. Correspondingly, capital inflows have also fluctuated in the past, typically driven by large amounts of Foreign Direct Investment FDI. Trade Structure France is the second-largest exporter in Europe after its largest trading partner Germany.

France is a member of the European Union EU and follows a trade policy similar to other member states with a common EU weighted average tariff rate. France is a relatively open economy; however, some barriers to trade are present.

Among goods, many agricultural products are protected at the European level, a policy that France advocated, and French farmers have historically been dependent on government subsidies.

France Economic Outlook

France receives large amounts of FDI and investment regulations are generally transparent, although many bureaucratic impediments persist. In contrast, the financial sector is relatively closed, with only a few foreign banks operating in the country. The French government provides significant subsidies to this sector and France is the largest exporter of farm products in Europe. Among services, tourism is a key export and France is the most visited country in the world.

Other key exported services include business services and transportation. France exports the largest amount of goods and services to Germany, followed by Belgium, Italy, Spain and the United Kingdom. Imports to France In recent years, France has been a net importer, consuming a large amount of imported goods and services. Among services, the largest imports into France are transportation and travel services.

Outside of the European Union, France imports the most goods from China. France, as a member of the EU, follows the common EU weighted average tariff rate on selected imports. Economic Policy Since the 1980s, the government of France has favored capitalism and market-orientated policies. However, the French government still plays a role in certain key national sectors, such as agriculture, and it will intervene in the market to moderate certain social economic inequalities.

Economics Department

Since the economic crisis, the government of France has had to re-evaluate this aspect of its economic policy. Fiscal Policy In recent decades, France, along with many other European countries, has experienced a rise in the size of government and an accumulation of public debt. Since the economic crisis, the government has had to face new economic realities and has used fiscal policy as a tool to stimulate the economy and reduce the budget deficit.

However, current President Hollande was elected on a campaign to eliminate the budget deficit through higher taxes on the wealthy while maintaining government spending. After missing deficit targets and with the French economy still experiencing weak growth rates, Hollande had to reevaluate his fiscal policy and in 2014 he pledged to cut government spending by EUR 50 billion over the next three years. In order to achieve this goal, the ECB uses a set of monetary policy instruments including setting the key deposit rate and benchmark refinancing rate.

  1. Since the economic crisis, the government has had to face new economic realities and has used fiscal policy as a tool to stimulate the economy and reduce the budget deficit. However, the French government still plays a role in certain key national sectors, such as agriculture, and it will intervene in the market to moderate certain social economic inequalities.
  2. France exports the largest amount of goods and services to Germany, followed by Belgium, Italy, Spain and the United Kingdom.
  3. Fiscal Policy In recent decades, France, along with many other European countries, has experienced a rise in the size of government and an accumulation of public debt. Since the economic crisis, the government of France has had to re-evaluate this aspect of its economic policy.

In 2014, the ECB cut the main refinancing rate to a record low of 0. Instead, the ECB used reverse transactions, repurchase agreements or collateralized loans, to manipulate the money supply.

France Economic Growth

However, during the recent sovereign-debt crisis, the ECB purchased bonds issued by feeble Eurozone countries to stimulate liquidity. The Eurozone members decided in 1998 to adopt a flexible exchange rate regime, allowing the euro to float freely.

By allowing the euro to float, the ECB targets interest rates rather than exchange rates and does not intervene in foreign exchange markets. After reaching its peak in 2008, the euro depreciated amid fears of a potential Eurozone breakup caused by the Greek sovereign debt crisis.

While the euro has gained ground since then, uncertainty regarding the evolution of the debt crisis continues to impact the rate. Sample Report Get a sample report showing all the data and analysis covered in our Regional, Country and Commodities reports.