With an annual inflation rate of 6.5% in August and unemployment still falling, we can say that France is doing well compared to its German, Spanish, Italian or British neighbors.
As the French wallet is increasingly affected by runaway inflation, the government constantly insists that France is not doing so badly compared to its European neighbors. And the data for August seem to confirm this. With an annual inflation rate of 6.5% in August, France is one of the least affected European countries.
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According to Eurostat data for the same period, inflation in the euro area reached 9.1%, it is 8.8% in Germany, 10.3% in Spain, 9% in Italy. In Britain this rate was 10.1% in July. “Everyone should normally have inflation around 9%, but France is an exception,” says Éric Heyer, economist and director of the analysis and forecasting department of Ofce.
Other good news on the economic front: unemployment fell by 0.8% in the second quarter with an average rate of the active population of 7.4% between the end of March and the end of June. A figure that places France in the European average. In February 2022, according to Eurostat, the unemployment rate in the EU was only 6.2%. Germany has one of the lowest rates, with just 2.9% of the workforce being unemployed as of March 2022. Outside the EU, the UK is also performing well, with unemployment rates falling further to reach 3.7%. On the contrary, with 13.5% unemployment, Spain shows the worst results on a European scale, before Greece (12.5%).
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The reasons for contained inflation
The government is satisfied with all these figures, but how to explain to the French in the face of rising prices that the situation is less serious than elsewhere? As for lower inflation, “it’s partly thanks to our energy mix,” explains Éric Heyer. Continuing to bet on nuclear power in particular allows us to be more independent than our German neighbor who imports far more fossil fuels. According to data from the International Energy Agency, Russian oil accounted for only 17% of black gold imports from France in 2019, compared to 34% from Germany.
The second reason and “the most important”, according to Éric Heyer, are “support measures for families, both with checks and with price freezes”. Germany, Great Britain and Spain have preferred, by political choice, financial assistance to citizens through the distribution of coupons and discounts on fuels, without freezing prices. “In Italy, a liter of gasoline now costs less than a liter of milk,” says Jean-Marc Daniel, professor emeritus at the ESCP Business School. France preferred to bet big on the tariff shield by freezing gas prices. It has been joined by several countries such as Spain, Portugal and, more recently, Great Britain. Liz Truss announced, two days after her arrival in Downing Street, a massive aid plan for rising energy costs.
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The tariff shield as a blindfold?
For Jean-Marc Daniel, the tariff shield “is an artificial change in prices, which, in the end, will only be a transfer for future generations”. They make it possible to contain inflation “in a limited time”, but “the creation of a budget deficit cannot last forever”. And it is obvious to all specialists that “inflation will rise again when we raise these tariff shields”. Éric Heyer states that “the French government has bet” with this price freeze that slows down inflation, “the aim is to avoid second-round effects”. Keeping inflation as low as possible allows you to limit a rise in wages that would force companies to raise prices. This would lead to a loss of purchasing power. “In Britain, significant wage increases have contributed to the rise in inflation,” explains Jean-Marc Daniel.
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France is doing well but “consumers see the reality in their shops (…), food prices rose 7-8% last month”, Michel-Edouard Leclerc did not fail to point out on BFMTV. Wednesday. This was confirmed by store boss E.Leclerc: “Yes, prices will continue to increase”.