2014: a year in data – Germany vs France
Mind the gap
|French President Francois Hollande, Chancellor of Germany Angela Merkel
Euromoney Country Risk data illustrate the gulf in the contrasting fortunes of Germany and France. Until recently rated alongside the German economic powerhouse, commentators now describe France as the new ‘sick man of Europe’ due to its stagnant economy, snowballing public debt and inability to meet its budget deficit targets. Worryingly for embattled President Francois Hollande, the gap between the two countries’ risk scores continues to widen, as economists increasingly view France as part of the Eurozone problem, rather than as a solution. Could a run on the French sovereign debt market be imminent?
France’s creditworthiness has continually worsened during the six years since the global financial crisis. The question is whether the rising risk trend will continue into 2015 and will that begin to affect its borrowing costs, which have recently hit record lows.
Unless there is an accelerated plan for full political and fiscal union, the next eurozone crisis could prove existential.
France’s fiscal deficit and public debt are at worrying levels. If structural reforms prove difficult, the country might be dragged into the eurozone crisis.