Usually, when we talk about deficit regarding the French economy, it is first the State budget one. We even were satisfied with its light reduction in 2022 compared to the initial forecasts. It has been revised downward and has so reached 147 billion when was expected at the end of last year a deficit near 170 billion. To the opposite the increase at an unprecedent level of the trade deficit, which is a much more revealing and worrying indicator of the weaknesses of the French economy, has given place to few comments. At the end of February, for the last twelve months, it became established at 167.2 billion euros.
Regarding February alone, it has reached 9.9 billion in diminution compared to January and it is that reduction which has attracted attention more than the extent of the deficit. The current accounts balance during these last two months has known a 3 billion euros deficit. This deficit is also without precedent. Traditionally, the surplus in services and repatriated from outside financial revenues compensated and even beyond for the weakness of the French trade exchanges. It is not any more the case. Without the euro that would have provoked a heavy crisis on the exchanges market and a fall of the national currency. But the protection provided by the European currency is not without limits. France has today the highest current accounts deficit among the major economies of the eurozone.
The aggravation of the trade deficit results first from the energy crisis which hurts Europe since the invasion of Ukraine by Russia. The oil and natural gas prices increase has been its logic consequence. But that situation has been made worse by the German strategy to concentrate its natural gas supply from Russia. Consequences for France has been made even more costly by the major mistakes made on nuclear issues and by the European choice, to which France has brought its support, to connect electricity prices with natural gas one.
In 2012, the French government has made approved an energy policy based on the reduction of the share of nuclear in the power production mix, trying even to bring it to 50% when it was at that time above 70%. No project of construction of new plants has been studied, which has accelerated the scarcity of qualified workforce hurting the enterprises of this sector. Worse, the two nuclear reactors of the Fessenheim power plant with a total capacity of 1.8 Gw, which, despite that, had received the operating authorization, have been closed under the pressure of the French ecologists, manipulated by their German counterparts.
The loss of technical know-how in the nuclear sector has made more difficult the catching up of the maintenance works after the end of the pandemic and the solving of the corrosion problems detected in 2022, at a time when the oil and gas prices were rising. The energy balance was then hurt by a triple penalty: fall of the nuclear production, increase of fossil energies prices and indexation of the electricity imports on the natural gas prices.
But the degradation of the trade balance is far from having as its only cause the energy crisis. Excluding energy, the trade deficit has overpassed in 2022, as an average, 5 billion per month, i.e. 60 billion during the year. It had registered a surplus until 2003. For twenty years, the situation continuously has worsened. During a long time, these who were against the common currency had explained that its overvaluation was the main cause of the French deficit. But that reasoning has not durably convinced because Italy, itself, had important and growing trade surplus when France was facing the opposite situation.
It is at that moment that occurred a new explanation which will be used as the basis of the economic policy by the successive governments: the labor costs would be at the origin of the loss of competitiveness of the French industry, of the de-localizations and of the increase of the trade deficit. Taxes and social charges reductions have then been decided, without any conclusive result as we can observe today. That supposed loss of competitiveness could not have a unique origin because results were very different from one sector to another. In 2022, the carmakers sector had a 20 billion euros deficit when, in the same time, the aeronautics and space industries had a 22 billion surplus. These activities, both of them, have recourse to engineers and highly skilled technicians and workers whose remunerations are closed, when they are note sometimes superior in the aeronautics. The true causes of the French deficit so are elsewhere.
First, there is the State. Its foreign policy is focused on political issues. It is enough to note that after the visit in China of the chief of State, the weakness of the results with only the confirmation of an order to Airbus which will be built in its Tianjin plant and the sale of 50 helicopters, despite the presence of an important delegation of executives from major French companies. The contrast with Germany is strong. The Scholz Chancellor trip had been exclusively devoted to the protection of German exports and to the signature of new contracts.
The process had been the same with Russia and the countries belonging to the former Soviet Union. The Helmut Kohl Ost Policy has been followed by his successors, especially by the social-democrat Gerhard Schroeder. Anyway, he will be thanked by the offer to become the chairman of the company building and operating the North Stream pipe-lines. It was necessary to profit from the rapprochement of these countries with Europe along with having access to raw materials with an attractive price. That strategy failed in the energy domain but it shows well the constant Berlin preoccupation in the research of trade benefits. The German successes also come from the importance given to the enterprises culture and from the recruitment mode of their executives.
The second cause of the French deficit comes, an other difference with Germany, from the low interest for the enterprise culture in many major groups. Their leaders are more preoccupied by the achievements of financial operations which rarely profit to the national economy than by the mobilization of the employees to find the products which correspond to the needs of their client and to produce them. The Air Liquid, L’Oreal, SEB or Safran successes are not enough to offset the failures of Renault and of many other jewels which have disappeared as Alcatel or Pechiney.
We cannot permanently quote Germany as an example about its trade surplus, which contribute to the growth and to the equilibrium of its public finances because profits are realized on the national territory and ignore the causes of its successes, in a first position of which are an efficient diplomacy and the promotion of the enterprise culture.
The remedy to this structural weakness of the French economy so doesn’t consist in distributing billions to companies without asking for what they will do with or if that corresponds to a real need but to give its full share in the diplomatic action to the economic challenges and each time the State has to give its opinion about the choice of an executive, to favor real entrepreneurs rather than to find another job for the former members of ministers cabinets.