France’s Economic Recovery Hampered By Onerous Regulation
France reported last week that its summer hosting of Euro 2016, Europe’s soccer championships, added $1.26 billion to its economy. This is good news, for sure, and worth celebrating.
But here’s the thing: Why doesn’t France put as much effort into supporting its businesses and markets as it does its soccer franchises?
After all, the country has an entrepreneurship problem—as in, business growth and its labor market are struggling.
A lot of the blame lies at the feet of its labyrinthine web of regulations, which the Organization for Economic Cooperation and Development (OECD) once called “unnecessarily complex.” Barriers to entry in several key industries, including architecture, accounting and legal services, are prohibitively high, which has decimated the country’s labor market in the last few years. More than 25 percent of all working-age French under the age of 25 are unemployed right now, a meaningfully higher rate than for youth in the European Union (18 percent unemployment), United States (10 percent) and Japan (4 percent). Household savings rates are skyrocketing, consumer confidence is on life support and investments growth has been sluggish.
As a result of all this, economic growth in France is among the worst for major EU economies. There it will remain, sadly, unless officials commit to strengthening competition by streamlining its tax system and reforming regulations. But at least it has some great soccer clubs.
The iShares MSCI France ETF (NYSE:EWQ) was unchanged in premarket trading Wednesday. Year-to-date, the largest ETF tied to French equities has gained 2.23%, versus a 1.22% rise in the benchmark S&P 500 index during the same period.
EWQ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #21 of 93 ETFs in the European Equities ETFs category.
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The Small Business Optimism Index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members.
The Producer Price Index (PPI) measures prices received by producers at the first commercial sale. The index measures goods at three stages of production: finished, intermediate and crude. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
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About the Author: Frank Holmes
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