This 1 Change Could Turbocharge France’s Economy

macron

If there’s one thing that defines modern-day France, it’s stringent labor laws that make it hard to lay workers off.

A “job for life” might be exaggerating, but such laws — “once hired, hard to fire” — have been a key feature of the social compact that’s largely defined France and much of the rest of Europe for the last 70 years.

It also makes it tough for companies to adapt and grow in a fast-changing global economy. According to Bloomberg, France’s labor courts hear 150,000 individual cases a year involving firings that a worker, or his union, believes unfair; the country’s laws on the subject run to 3,000 pages.

Enter new French President Emmanuel Macron with a small but highly important change that could turbocharge France’s economy…

Macronomics

With a 10% jobless rate — yet thousands of protesters marching in the streets protesting labor reform — France’s new leaders have to do something.

According to Reuters, Macron “invoked special powers” in recent days to push through changes in labor laws that will make it easier for companies to hire and fire staff. Presuming they don’t get sidetracked in court or in Parliament, the new laws would go into effect by decree in September.

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How big a deal is this? As Macron’s new friend in the White House might say, it’s gonna be huge.

“The Mother of All Reforms”

That’s what France’s finance minister called the labor reform effort in an interview in Le Figaro back in June. It’s that big.

The International Monetary Fund already raised its 2017 forecast for France’s economic growth to 1.5%, adding it could “further accelerate” next year.

If there’s one thing that defines modern-day France, it’s stringent labor laws that make it tough for companies to adapt and grow.

(Source: Tradingview.com)

The prospect of labor reform has already pushed France’s main basket of stocks, the CAC 40 Index, to its highest levels in nearly a decade.

Stocks in the country could rise higher still once the labor law changes and a second set of Macron’s reforms on France’s onerous tax code — also expected to be approved by France’s Parliament — go into effect.

According to economists interviewed by Bloomberg, “lower taxes could lift French company earnings by 12 percent, while a reduction in labor costs could lift pretax profit by up to 11 percent for blue chips.”

In the same article, investment bankers now say they’re seeing more corporate customers walking in the door looking for merger advice. And fund managers “now see France as their preferred investment destination, even ahead of Germany.”

Ultimately, it all contributes to a faster pace of growth in the euro zone.

All of which points toward something I’ve been talking about for a while now. Investors need to put a portion of their funds into Europe, not only to help diversify their portfolios, but to capture the faster growth now occurring there in the wake of higher stock prices.

Kind regards,

Jeff L. Yastine
Editor, Total Wealth Insider

  • Hans Eirik Olav

    France is doomed. The banks are broke. Period. The governments share of GDP is more than 60 percent. Its disadcantage in competing with Germay equates to a 70% increase in productivity. It cant devaluate because its in the EMU, and it cant devaluate by cutting cost in land. The debt level is beyond the point of no return. Its a goner. In addittion France has 200 suburban areas or more where people are impoverished and largly muslim. Riots is a daily affair. The likelihood of a new French revolution is growing by the day. Forget France unless you believe the French understands before any other eurpean countries that EU socialism/communism is the root of Europes demise. Dont put any money into Europe. Its the worst investment advise ever. Period.

  • Carl Smith

    Do you live in France or are you french?

  • Hans Eirik Olav

    Norway. Its bad here too, but rest of Eurozone is worse. Entire banking system is bankrupt and kept running by ECB trickeriing through Target 2. Soon to be a replica of Venezuela. Thats what 100 years of socialism will do. Its just a matter of what makes the bubble pop.

  • Jim Anderson

    I’m glad they are waking up but it likely is too late. They let in far too many unproductive people who are a drag on their economy. The good news for France is that Germany is about to go down the same road. Perhaps they will die together. I can imagine what has happened to their tourist trade with all of the riots and violence. It can’t be good.

  • jringo55

    The world is financially falling apart with it’s massive debts — a cave man could see it.

  • Carl Smith

    why such negative comments on this page? I live in Germany and I can assure you the Germans have never had so much wealth and are doing just great. They are rich and drive BMW or Mercedes plus young people building houses left and right…..much richer as their parents. There is no unemployment and everyone has a job. France also is doing better than most people in the USA. The EU is aligning with China to replace the USA…..there is so much money floating around here. Even the lazy refugees are happy with their welfare. Tourism sets new records every year. The flip side is it is getting much more expensive to travel here if you are American….

  • jringo55

    Depends on where you live I guess. America is heavy in debt. As are many other nations. The politician’s act like the debt is nothing but it’s weighing the economy down and the common folks are afraid to spend after being hit hard with the 2008 recession.Truth is, the people on Main Street never recovered from it. More than half of America’s bread basket is living pay check to pay check. The FED says we are recovering. It’s not true. The plan is to push for 2% annual inflation. That will be a disaster for people who are barely getting by and for those on fixed incomes. Will most likely push America into the next recession. Will that affect the world? I’m pretty sure it will.

  • Marga Doerr

    Mr. Smith you must live in a different Germany than the one I visit each year lol 😁. I know a number of people who are qualified but have not been able to find employment a number of years. Local and state governments are cutting funds for parks and culture continuously because of shortage of funds. All to the amusement and frustration to people as Germany supposedly is supposed to be so rich.