Transcription
Now, so many of France's political problems come back, as they do in so many countries, to the economy and what's going on uh economically, and there's a few ways we can look at this.
First of all, look at just how much investors are charging the French government to lend to us. It's pretty good metric for just how worried people are. This is showing you just how much bond yields have kind of gone up or indeed down in major economies uh in Europe in recent uh months. You've got Germany, Greece, Italy there. Just look at France. So the change in uh that interest rate charged to France has gone up. It's is much higher for France than for for these other countries.
And if I show you just another way of looking at the same numbers, this is pretty striking. Okay? Because what a lot of people do is they like to compare countries like this to Germany because the overall level of German uh buds as they're known is really typically quite low. And here's what's quite striking about this chart. Look at the red line there. It is more expensive right now to lend to France. So investors are charging France more uh for its borrowing than Greece. And who would have thought that you know given what happened you know a decade and a half ago in the euro crisis that France is now viewed as a more expensive potentially more risky place to lend money to uh than Greece. Very striking uh indeed.
And it's not just the bond markets where you see some you know causes for concern. This is showing you share prices. Okay. So higher is tends to be better here. uh the DAX there, that's the German index, the MIB from uh Italy, the Milan uh S&P 500, that's the UK there, the Footsie 100. The key thing here is compare France with the rest. The cat car has really just not had as good a year uh as those other indexes. And it's just another uh indication that this is not just about the government, it's about everything. Uh but it is primarily the focus primarily is on things like this.
This is showing you the deficit uh in France. And the higher this line is, the the kind of lower the deficit is, the you know, you might be heading for surplus, so bringing in more taxes than you're spending. But the lower it is, the bigger the deficit. And the concern, the problem for France is, you know, in the pandemic, they went well below that EU deficit limit. They're supposed to be up to this kind of 3% or so uh mark. There were plans post pandemic to bring that higher. So to bring down spending uh to bring up taxes to some extent. But in the event that's what happened and this is part of the explanation for why you have these continued collapses in the French government. They can't get these budgets actually implemented. There was a plan again to bring that up. So to bring the deficit down and to bring spending down and to get the deficit up towards that 3% uh EU deficit limit. But in the event that looks like that's going to implode as well. And France as a result is heading in this direction. So this kind of 6% or so deficit far higher uh than the EU limit and indeed far higher than most other countries around the world. So this just comparing other countries like the US is actually the closest neighbor there. Uh but look Germany uh the UK is heading uh to this kind of you know some people would see it a safety zone in the coming years. So too Spain, so too Italy. France is the outlier. That red line there.
And if you look at talking about outliers, look at total public spending as a percentage of GDP. This is how much the state spends in various different countries. And look who is right there at the top. It is France. And that's something that that Bou, the prime minister has said he wants to try and uh uh deal with. He said, you know, he wanted to bring that down by a couple of percentage points. That is so unpopular. And that alone, that plan, uh, is part of the reason why, you know, everything is starting to implode politically uh, in France.
Um, worth just saying, there's another thing that's definitely a cause for concern in France, which is that for a long time, a lot of people thought that productivity, so output per hour was France's secret weapon. People didn't work as many hours, but they they generated a lot of income in those hours. But in recent years, so there's France, there you've got the OECD, there you've got the EU. The higher this is obviously, the more the productivity uh, is rising. Look at what's happened recently. So, French productivity has been really disappointing uh in recent years. And that then feeds into everything else. If you're not generating as much income across the economy, then you have problems with the public finances, problems with basically everything else.
Final thing to note because I know this has all sounded pretty grim. Worth just saying, and actually all of the some of the language we're hearing in France uh is pretty grim as well. This is nothing like what we saw in the 2010 2011 period, the Euro crisis. So that's the Euro crisis. Look at those are Greek bond yields, government bond yields up to kind of 35% or so. That's Spain. That's France. And now compare where we are at the moment. So it's certainly true that the French line is elevated versus the rest. But we are nowhere near right now. We are nowhere near the crisis that we had back uh a decade and a half ago. At least nowhere near it quite yet.