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 portfolio of the French is more and more affected by galloping inflation, the government is constantly hammering that France is not doing so badly compared to its European neighbors. And the figures for August seem to confirm this. With an annual inflation rate of 6.5% in August, France is one of the least affected European countries.
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According to data fromEurostat for the same period, 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 normally, but France is an exception,” notes Éric Heyer, economist and director of the OFCE’s analysis and forecasts department.
Other good news on the economic front: unemployment fell by 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 figure that places France in the average in Europe. In February 2022, according to Eurostat, the unemployment rate in the EU was only 6.2%. Germany has one of the lowest rates, with just 2.9% of the labor force unemployed in March 2022. Outside the EU, the UK is also performing well, with unemployment rates falling further to reach 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 reasons for limited inflation
The government is pleased with all these figures but how to explain to the French faced with the increase in prices that the situation is less bad than elsewhere? Regarding lower inflation, “it’s partly thanks to our energy mix”, explains Éric Heyer. Continuing to bet on nuclear allows us in particular to be more independent than our German neighbor who imports a lot more 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 reason and “the most important”, according to Éric Heyer, are “the measures to support households, either with checks or by freezing prices”. Germany, Great Britain and Spain have preferred, by political choice, financial assistance to citizens by distributing vouchers and discounts on fuel, without freezing prices. “In Italy, a liter of gasoline now costs less than a liter of milk,” says Jean-Marc Daniel, professor emeritus at ESCP Business School. France preferred to bet big on the tariff shield by freezing gas prices. It has been joined from several countries such as Spain, Portugal and more recently Great Britain. Liz Truss announced, two days after her arrival in Downing Street, a massive aid plan in the face of soaring energy costs.
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The tariff shield as a bandage?
For Jean-Marc Daniel, the tariff shield “is an artificial modification of prices, which, in the end, will just be a transfer for future generations”. They make it possible to limit inflation “in a limited time” but “the creation of a budget deficit cannot last forever”. And it is obvious for all the specialists, “inflation will rise again when we lift these tariff shields”. Éric Heyer affirms, “the French government has made a bet” with this price freeze which slows down inflation, “the goal is to avoid second-round effects”. Keeping inflation as low as possible makes it possible to limit an increase in wages which would force companies to raise their prices. This would lead to a loss of purchasing power. “In Great Britain, significant wage increases have contributed to the rise in inflation,” explains Jean-Marc Daniel.
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France is doing well but “consumers are seeing the reality in their stores (…), food prices have increased by 7 to 8% last month”, did not fail to point out Michel-Edouard Leclerc on BFMTV this Wednesday . The boss of the E.Leclerc stores confirmed it: “Yes, the prices will continue to increase”.