France’s Path Not Taken

Until recently, the French economy outperformed many EU countries. But now France is one of Europe’s laggards, growing only slightly faster than Italy and Portugal, and slower than even Germany, mainly owing to a hostile environment for small and medium-size firms.

The new president of France, be it Nicolas Sarkozy or Ségolène Royal, will face a tough challenge when it comes to putting the French economy back on its feet. While the world economy is booming for the fourth consecutive year, with a historically unprecedented growth rate of about 5%, the French economy is limping. In 2006, it grew by only 2.2%, while growth rates of only 2.1% and 1.9% can be expected for 2007 and 2008, respectively, according to a recent forecast by the German Economic Research Institutes. This is significantly below the average of the old EU countries for these three years – 2.7%, 2.6%, and 2.4%, respectively.

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