ANALYSIS: Why it might be time to thank the Gilets Jaunes for France’s strong economy

ANALYSIS: Why it might be time to thank the Gilets Jaunes for France's strong economy
The Gilets Jaunes caused plenty of damage, but may have inadvertently strengthened the French economy. Photo: AFP
Economic growth in France is now stronger than Germany and - ironically - it might be thanks to the Gilets Jaunes, writes John Lichfield.

Forget the doom-mongers and nay-sayers (as Boris Johnson might say). France is booming.

OK. D’accord. France is not precisely booming. Some parts of France and some French people are still struggling.

All the same, the growth figures for the third quarter released on October 30th exceeded expectations at 0.3 percent. Annual growth is now likely to be 1.4 or 1.5 percent, a little down on 2018 but well above Germany which may have tipped into a recession (after two quarters of economic decline.)

READ ALSO France's unemployment rate falls to new 10-year low

Unemployment is at its lowest level for a decade. Photo: AFP

French unemployment is now the lowest in a decade at 8.2 percent and still falling. Jobs are being created in large numbers. Many of them are “real jobs” – in other words permanent contracts or contrats à durée indéterminée (CDI), not temporary jobs or state-subsidised jobs.

Who deserves the credit for this comparative French boom?

Emmanuel Macron and the Gilets Jaunes.

France is doing better than Germany partly because the French are spending more money on everything from food to cars. Why is domestic consumption rising? Partly because President Macron – against his original instincts and intentions –  injected over €10 billion in tax and other concessions for low and medium earners directly into the economic bloodstream last winter and spring.

Why did he do that? To quell the original Gilets Jaunes rebellion which started almost exactly one year ago.

Say “merci” to the Gilets Jaunes, Monsieur Macron.  Actually, he already did – sort of.

The French economy is also humming because internal investment is strong. Why? Because business is confident that Macron's labour and other reforms are taking the country in right direction.

The leap in job creation is linked partly to Macron’s changes in French labour law, which started under President François Hollande (at Macron’s urging).

Employers are more willing to offer full-time jobs because it is easier for them to end contracts if necessary.

This is not the narrative of Macron-imposed woe told by the original, provincial yellow vests, whose numbers have greatly declined since March. It jars with the dark portrait of a “suffering” or “oppressed” France still painted each Saturday by the persisting, hard-left-oriented Gilets Jaune and their foreign fans of hard left and hard right.

Say “merci” to nice President Macron, Gilets Jaunes. Not much chance of that.

READ ALSO ANALYSIS Why pension reform in France always spells trouble

Macron spent some time listening to the concerns raised by protesters and local mayors after the Gilets Jaunes protests. Photo: AFP

The relative French boom is, admittedly, patchy. There are even patches within the patches.

Unemployment among the young (25 or less) remains stubbornly high. Not all regions are doing well even if some areas which have suffered economically for decades are beginning to recover.

As a senior minister ruefully admitted last week, the jobs bonanza is mostly concentrated in the thriving metropolitan areas. It has not yet reached the peripheral, small town or hard-scrabble, outer-suburban France where the original Gilet Jaune rebellion began in October-November last year.

There are, however, exceptions to this exception. The north of France – the long-depressed, ex-mining and industrial area around Lille and Calais – is creating jobs more rapidly than the country as a whole. Unemployment in the Nord and Pas de Calais départements has fallen by over 5 percent in a year – more than double the rate nationwide. It still remains miserably high, at over 10 percent.

Interestingly, many of the new jobs in the north – in services, transport and construction – are going to people in their 50s  who have been unemployed for many years.

Several factors explain the relative health of the French economy as a whole. France is strong in financial and other services which have been less affected by the global trade recession than physical goods (which accounts for Germany’s troubles).

The French official statistics office INSEE links the better than expected performance in the third quarter (July-September) to a 0.3 per cent jump in household spending. This in turn, says INSEE, is explained by the extra purchasing power generated by Macron’s concessions to the Gilets Jaunes, including tax cuts for the lower paid and a state-subsidised bonus for many people on the SMIC (minimum wage).

French employment minister Muriel Pénicaud. Photo: AFP

This may be a temporary boost. The effects of Macron’s changes in French labour law and other reforms should be  permanent. The OECD now says that Macron’s target of 7 per cent unemployment by the end of his mandate in 2022 is “not impossible”.

Macron reforms have made long-term contracts more attractive to employers by, inter alia, limiting the cost of early or unfair dismissal. They also made short-term contracts more costly to bosses and changed tax and benefit rules to make low-paid work more attractive than welfare.

France, according to the OECD, now has less rigid labour laws than Germany. The employment minister, Muriel Pénicaud told the Financial Times this week: “Many jobs, particularly permanent ones, have been created because companies, especially small ones, are no longer afraid to hire”.

Several problems remain. Over 2,400,000 people are still out of work. There are 400,000 vacant jobs because unemployed people do not always have the right skills or because benefits can still be more attractive.

The North apart, most new jobs are being created in the booming Metropolitan areas such as of Paris, Toulouse, Grenoble, Bordeaux and Montpellier.  Well-paid jobs remain scarce in the hundreds of declining rural towns where the Gilets Jaunes revolt began. That is a problem which needs to be addressed, urgently.

All the same, this week’s figures provide a welcome antidote to nonsense about a “suffering” France beset by weekly riots which is still systematically spread online.

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