France Posts Record High Trade Deficit, While German Industrial Output Also Drops

By Palash R. Ghosh: Subscribe to Palash's RSS feed

February 7, 2012 11:40 AM EST

France’s trade deficit reached an all-time high last year – amounting to about 69.6-billion euros -- raising serious questions about French competitiveness and its ability to cope with rising energy import costs and climbing labor expenses.

Previous image Enlarge Close Next image

Share This Story

Roger Bootle, a senior economist at Capital Economics in London, said of France’s fragile economy: “Signs that France is following the periphery into recession… are clearly very worrying. If the euro-zone’s second largest economy is turning down, there is little hope that the region as a whole can avoid a recession. What’s more, France’s weakness will make it even less able to provide any further support for the indebted periphery.”

Meanwhile, France’s powerful neighbor Germany suffered its biggest drop in output in almost three years.

“As the industrial downturn continues and households remain in cautious mode amid a deepening crisis elsewhere in the euro-zone, we see the German economy stagnating this year,” said Jennifer McKeown, senior European economist at Capital Economics.

Must Read

Sponsorship Link

“What’s more, worse might well be to come in 2013.”

Follow us

The trade data from Paris strongly suggests that the euro zone financial crisis is putting a severe crimp in France’s (and perhaps Europe’s) share of global trade.

Michel Martinez, an economist at Societe Generale SA in Paris, told Bloomberg: “France’s trade deficit has been deteriorating for a decade, and it’s about competitiveness, it’s obvious.”

Indeed, France has logged trade deficits every year since 2002, while the French share of international trade has been shrinking.

According to the French treasury, France’s share of global trade fell from 7.8 percent in 2003 to 6.2 percent in the final quarter of 2011.
France is gradually losing its vitality and presence in global export markets.

French imports climbed 11.7 percent last year (as measured in euros), while the value of exports rose by 8.6 percent (down from a 14 percent increase in 2010).

France's exports to its European Union (EU) neighbors grew by only 7.5 percent, versus 11.5 percent growth in 2010. Exports elsewhere in the world climbed by 8.8 percent, dramatically less than the 18.6 percent growth recorded in 2010

Overall, the French trade deficit was 35 percent higher than that recorded in 2010, although it fell at the lower end of the Paris government’s own forecasts.

"The problem is that of competitiveness and reindustrialization of our country," France’s foreign trade minister Pierre Lellouche told reporters in Paris.

"Today's figures are clearly not good but I am happy at the same time to see that our foreign trade position is becoming an issue as the presidential election approaches."

1 | 2 Next page | View all

This article is copyrighted by International Business Times, the business news leader