Can Manuel Valls change France?

France has a new prime minister, but don't expect economic change.

Last week, France's President Franois Hollande made "a move as uncharacteristically bold as it is potentially encouraging for the cause of economic reform in France", says The Economist. He appointed Manuel Valls, a business-friendly centrist, as his new prime minister.

France's economy continues to languish. With high unemployment dampening consumption, and fiscal cutbacks another headwind, "a self-sustaining recovery is still out of reach", says Morgan Stanley.

So, the only way France is going to get its burgeoning debt pile under control in the next few years is through structural reforms to raise the economy's growth potential.

Can Valls get France moving again? Don't hold your breath, says Deutsche Bank.The latest government reshuffle has left many traditional socialists in the government.

The risk is that Valls will be "forced into compromises with the left" and have to rely on short-lived cuts in current spending to trim deficits, rather than "far-reaching changes in the structures of government".

So, some of the relatively limited measures promised this week and earlier this year notably a payroll tax cut, lower corporation tax from 2016, and a pledge to seriously rein in spending after 2015 may well fail to materialise.

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Will a stronger euro ruin Europe's rally?
European stockmarkets

Will a stronger euro ruin Europe's rally?

International investors have been buying into European stocks, driving the euro higher. But that surge now risks dampening the recovery that started i…
21 Sep 2020
No deal is the best deal for Britain – and the EU too
Brexit

No deal is the best deal for Britain – and the EU too

Europe has a lot to gain from a thriving, independent Britain, says Matthew Lynn.
6 Sep 2020
Europe’s magic works better in the dark
EU Economy

Europe’s magic works better in the dark

Europe’s latest fiscal intervention looks like the kind of muddle-through that makes a United States of Europe more likely, says Merryn Somerset Webb.…
28 Aug 2020

Most Popular

Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020
IAG's share price is ready for take-off - here's how to play it
Trading

IAG's share price is ready for take-off - here's how to play it

The owner of British Airways has had a turbulent year, but is now worth a punt. Matthew Partridge explains the best way to play it.
8 Sep 2020