French economy lags Europe as Hollande fails to implement reforms

 
Nassos Stylianou
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President Francois Hollande should act now to "avoid pain later" says one analyst (Source: Getty)

France risks getting left behind in the Eurozone's economic recovery, as confidence in its markets has failed to pick in line with former crisis stricken southern countries.

According to Berenberg's senior economist Christian Schulz, Paris needs a change of tack in order to keep up with the recovery in the EU's periphery, specifically Italy and Spain in this analysis.

"While the former crisis countries in the south have caught up with the Eurozone average in sentiment indicators, France has fallen behind," Schulz writes.

According to Markit data, the three-point gap between France’s purchasing managers' index and that of the Eurozone is nearly as large as the periphery’s gap at the height of the euro crisis in the period 2011 to 2012, signalling that private sector activity is much stronger in the wider region.

While the periphery's catch-up process began with the labour reforms in Spain and Portugal in early 2012, France's gap appeared with Francois Hollande's election as president.

Schulz believes that instead of capturing the opportunity to "unleash France’s huge economic potential with supply-side reforms", Hollande instead raised taxes for entrepreneurs and modest labour market reforms were reversed with only "a few positive mini-reforms".

The French economy stagnated during the first three months of 2014 as consumer spending slumped, while the Eurozone is growing, albeit modestly. Hollande should renew the push reforms now to "avoid pain later", according to Schulz.

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