Our finance guru Randal Hines says it’s time to batten down the hatches and get back into wrangling that pesky eurozone crisis. In an article in the Fall 2012 issue of Carnet Atlantique, he raises a few good points about the sustainability of the European work model:
“Having Spain as your neighbor does have its benefits. France was able to sell six month treasury bills at negative yields for the first time; in other words, investors of short term French debt are willing to pay the government to park money with it. Negative yields on short term debt instruments are typically reserved for the most credit worthy of sovereign nations.
With S&P’s downgrade of French debt earlier in the year, and two quarters of zero GDP growth, it is somewhat surprising France can issue short term debt with negative yields; however, relative to Spain, the French own one of the nicer homes in a very bad neighborhood. That France is finally getting some of the benefits of the crisis that have been boosting Germany’s position for months doesn’t bode well for the most indebted euro-zone members. However, France’s finances are not even close to being as good as Germany’s, and its banks have heavy exposure to Greece and Italy.
The French enjoy the most paid vacation days, and have the largest public sector workforce in the Eurozone while maintaining the world’s fifth largest economy.
Fortunately, France’s productivity per hour is among the highest in the world. Problem is, French workers are on the job an average of 300 hours less per year than their American counterparts, so French economic growth lags many developed countries.”