With an annual inflation rate of 6.5% in August and unemployment still falling, can we say that France is doing well compared to its German, Spanish, Italian or British neighbors.
While the French portfolio has been particularly affected by high inflation, the government has always hammered home that France is not doing so well compared to its European neighbours. And the numbers for August seem to confirm this. With an annual inflation rate of 6.5% in August, France is one of the least affected countries in Europe.
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According to Eurostat data at the same time, inflation in the euro zone reached 9.1%, it is 8.8% in Germany, 10.3% in Spain, 9% in Italy. In Great Britain this rate was 10.1% in July. “Everyone should have around 9% inflation in normal, but France is an exception,” said Éric Heyer, economist and director of the analysis and forecasting department of the OFCE.
Other good news in the economic field: unemployment fell to 0.8% in the second quarter with a rate of 7.4% of the active population on average between the end of March and the end of June. A number that puts France on average in Europe. In February 2022, according to Eurostat, the unemployment rate in the EU is only 6.2%. Germany has one of the lowest rates, with only 2.9% of the labor force unemployed in March 2022. Outside the EU, the UK also performed well, with the unemployment rate still down to 3.7%. On the contrary, with 13.5% unemployment, Spain shows the worst results on a European scale, above Greece (12.5%).
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The causes of limited inflation
The government is happy with all these figures but how to explain to the French who are faced with rising prices that the situation is not worse than elsewhere? Regarding low inflation, “this is partly thanks to our strong mix”, explained Éric Heyer. The continuation of the nuclear bet allows us especially to be more independent than our German neighbor who imports a lot of fossil fuels. According to figures from the International Energy Agency, Russian oil accounted for only 17% of black gold imports from France in 2019, compared to 34% for Germany.
The second factor and “most important”, according to Éric Heyer, are “measures to support households, either with checks or by freezing prices”. Germany, Great Britain and Spain preferred, by political choice, financial assistance to citizens by distributing vouchers and fuel discounts, without freezing prices. “In Italy, a liter of gasoline now costs less than a liter of milk,” said Jean-Marc Daniel, professor emeritus at the ESCP Business School. France prefers to bet big on the tariff shield by freezing gas prices. It has been joined from many countries such as Spain, Portugal and recently Great Britain. Liz Truss has announced, two days after her arrival in Downing Street, a big plan to help in the face of rising energy costs.
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Tariff shield as a bandage?
For Jean-Marc Daniel, the tariff shield “is an artificial change in prices, which, in the end, is just a transfer for future generations”. They made it possible to limit inflation “for a limited time” but “creating a budget deficit will not last forever”. And it is obvious for all specialists, “inflation will rise again when we lift this tariff shield”. Éric Heyer confirmed, “the French government is betting” on this price freeze that slows down inflation, “the purpose is to avoid the effects of the second phase”. Keeping inflation as low as possible makes it possible to limit wage increases that would force companies to raise their prices. This leads to loss of purchasing power. “In Great Britain, the large increase in wages contributed to the rise in inflation,” explained Jean-Marc Daniel.
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France is doing well but “consumers have seen the reality of their stores (…), food prices rose by 7 to 8% last month”, Michel-Edouard Leclerc of BFMTV did not fail to point out this wednesday. The boss of the E.Leclerc stores confirmed this: “Yes, prices will continue to rise”.