What entrepreneurs need to know about the French economy today
December 16, 2014
By Lidija Pecov, Europe Correspondent
The economy in France looks like stalling as unemployment increased again after the release of the September figures. In fact, unemployment has now reached a new high with a record 3.43 million unemployed and some agencies suggesting that under-employment is just as high. “Let’s be honest, we are failing,” French Labor Minister François Rebsamen told Le Parisien newspaper. If you think unemployment is all that’s going wrong with France right now then wait for it – Frances credit rating has been whacked by the ratings agency Fitch down by a notch.
Fitch said that "The 2015 budget involves a significant slippage against prior budget deficit targets," which is an indication that the challenge with the French economy is still very much about dragging itself from debt. What does this mean for start-ups, entrepreneurs and business? well, a recent survey suggests things are not as bad as they would seem although many are worried about access to capital. They are joined by investors:
"French banks have already written down exposure to Greek debt but the S&P downgrade of the U.S. has had a cascading effect. There are now even more questions about funding and access to capital," said Andrew Busch, global currency & public policy strategist with BMO Capital Markets in Chicago.
Therein lies the problem – if there are going to be additional barriers to capital then the reality is small business growth will stall and start-ups will find it increasingly difficult to get off the ground. That said, there have been success stories. As we reported earlier this year BlaBlaBlaCar were able to raise $100 million – but then again, it was unique. At the time it busted the French record.
The recovery across Europe remains stable but it is taking time with a number of Governments now looking at the results from stress testing of the banking system undertaken by the European Central Bank. While a majority have passed there were still 9 banks in Italy that fell short with two banks requiring additional funds to be raised. In fact, 25 of the euro-zones 130 banks failed the health check in a shortfall of some $25 Billion euros (no chump change right). One French bank was among the 25.
In an attempt to try and kick things along the Government in France has announced a raft of new measures which includes an expansion to Sunday trading laws. That hasn’t gone down well in the Socialist ruling party who obviously would prefer to protect worker entitlements. There are also plans to open up sectors such as travel and transport in a move to try and deregulate. Shops that are situated in what are being called international tourist zones will benefit the most with the Prime Minister Manuel Valls saying: "Do we want millions and millions of tourists -- notably Chinese -- who come to the capital to leave us and go and do their shopping in London on a Sunday?"
Time will tell if all of this is enough – in the case of entrepreneurs, start-ups and small business there are benefits and challenges ahead. For small retailers a relaxation of trading laws should provide a boost and deregulation of travel and transportation could provide some great investment opportunities (which is probably what BlaBlaCar were looking forward to).
Overall – France is in a holding pattern!
About the Author: Lidija Pecov is EntreHub Eruope CEO and Chief Correspoondent for Europe. Follow her on Twitter HERE
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