🇫🇷Weekly Dispatch - Economic momentum

30/07/23 - The French economy maintains its momentum, Emmanuel Macron announces a constitutional revision for New Caledonia, and Aurore Bergé announces summer camp pass for French children

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This week

• 💶French economy maintains its momentum

• 🇳🇨Macron announces constitutional revision

• 🏕️Aurore Bergé announces summer camp pass

💶French economy maintains its momentum

Photo by Ibrahim Boran on Unsplash

Let’s start the week off with some more good news!

The National Institute for Statistics and Economic Research (INSEE) revealed this week that France's GDP grew by 0.5% from April to June, much higher than the 0.1% forecast, highlighting the French economy's resilience.

Follows the 0.1% growth rate in Q1 of 2023. Bruno Le Maire, the Minister of Economy, praised this "extraordinary achievement" while reiterating the government's forecast for 1% growth for 2023. This has been in stark contrast with the overly pessimistic mood that French citizens and certain politicians have projected over recent months,

To break it down for you all: This growth in GDP is mainly down to strong exports, especially of transport equipment, which has grown faster than imports. As a result, international trade contributed positively to quarterly growth. The resurgence of manufacturing, market services and power generation, fuelled by the restarting of nuclear power plants, also contributed to this growth and reinforced the French economy

Momentarily turning to Europe, the European Central Bank (ECB) has implemented unprecedented monetary tightening over the past year to control price escalation resulting largely from the Russian invasion of Ukraine.

The ECB has an inflation target of 2% by 2025, a goal resulting in a significant increase in interest rates. This tightening of financial conditions is starting to weigh on demand and impacting household and business investment, which has been fuelled by credit, raising questions across Europe.

However, it isn’t all sunshine and daisies in the hexagon.

According to INSEE, despite better-than-expected results in the second quarter, the economy is expected to slow down in 2023, with GDP growth of just 0.6% for the year. This number pales in comparison to 2.5% in 2022. However, the government maintains an optimistic outlook on growth of 1%, even if it may revise its estimates when it presents its 2024 budget in September.

Néanmoins, according to the International Monetary Fund (IMF), France is expected to avoid a recession this year, surpassing Germany with a revised growth forecast of 0.8%.

The executive's will to restore public finances undermined by the crises by deploying a more restrictive budgetary policy, ​​particularly through reducing the tariff shield, will likely have an impact. This means that the currently regulated electricity tariffs are expected to increase by 10% on August 1st.

A much smaller increase than experienced by France’s neighbours since the start of the Russian invasion of Ukraine.

These negative effects will, however, likely be offset by the strong employment levels and the acceleration of wage growth across the country, the results of which usually follow inflation with a slight lag.

Likewise, a small rebound in household consumption will also benefit the state and give the French government more leeway.

🇳🇨Macron announces constitutional revision

Photo by Léo Lacrose on Unsplash

Moving overseas, Emmanuel Macron visited New Caledonia this week to meet with leaders of the territory and to make a point on the future of the territory following three referenda on New Caledonia’s position within the French Republic.

For context: as part of the 1998 Nouméa agreement, New Caledonia was allowed to have three referendums on “accession to full sovereignty”, which took place in 2018, 2020, and 2021, pushed heavily by separatists.

For non-independence campaigners and the French state, these all favouring remaining a part of France was a definitive rejection of the idea of sovereignty. However, the separatists, who orchestrated a boycott of the third referendum, which polls showed them losing, argue otherwise.

Emmanuel Macron is therefore now taking the opportunity to offer a new legal framework to attempt to find an agreement between the various actors, “beginning 2024”, which will take the form of a new legal framework that will revise the constitution:

“In any case, there will have to be a change in the Constitution and this change will take place…after having spoken with the President of the National Assembly and the President of the Senate, I also know that they share this desire.”

The main problem for the president is, naturally, the schism on the islands.

Despite the French state holding up its side of the bargain and French unionists supporting the Nouméa agreement, the separatists continue to fight against the agreement they themselves supported until they realised they would not get what they wanted.

Having protested the visit of the French head of state, representatives of the Caledonian Union also boycotted a planned meeting between Emmanuel Macron and the leaders of groups from across the political spectrum of the islands. This pushed the President to state that he was “personally hurt”.

However, it appears that these experiences have also reinforced Emmanuel Macron’s will to reinforce ties between France and its overseas territory.

Emmanuel Macron underlined the roadmap that has given himself: a commitment to "keep the peace" that was concretised by Matignon’s agreements in 1988, to "consolidate respect” for the Kanaks and, above all, “work more on developing trust” between the French state and the local population.

"My deep will, and our common duty now, is to build the future."

However, he also cautioned everyone from looking “at the past” and called for everyone to avoid the “great risk of standing still and locking oneself in a fixed identity” and to “find a form of comfort in the permanent instability”, a message aimed clearly at separatist politicians.

🏕️Aurore Bergé announces summer camp pass

Photo by Tegan Mierle on Unsplash

Next, we go to an interesting initiative that is intended to overcome a major issue in France: that of poverty which affects the experience of young children. Appearing on France 2 this week, the new Minister of Solidarity and Families, Aurore Bergé, underlined that “roughly one child in four who does not go on vacation”.

The government made it clear that it wants to be able to give every child a chance to be able to enjoy their summer holidays, benefit from beneficial experiences where they make friends and explore France, and to give as many children as possible the opportunity to answer the question: "what did you do during the holidays?"

It’s for this reason that Aurore Bergé announced the creation of the “pass colo”, giving kids the opportunity to go to ‘colonies de vacances’ (summer camps en bon anglaise), to make friends, memories, and experience things that will reinforce their lives.

The initiative is intending to give every child “200 to 350 euros” that can be used by parents to send their children to camp thanks to the Caisses d'Allocations Familiales (CAF, or Family Allowance Funds). It will be set up for roughly 80% of children, and benefit families with up to €4,000 income.

Currently, around 200,000 children receive individual aid from the CAF each year, which follows a relatively simple process, and it’s this programme that Bergé wants to reinforce.

The current timeline is looking fairly quick, with Bergé expecting to announce this with the Prime Minister in early September, as part of the framework of the solidarity pact. This pass is expected to be in place at some point in 2024, hopefully in time for the summer holidays.

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