German Business Downturn Eases But French Economy Struggles

The German economy, Europe's largest, has shown signs of recovery after a period of stagnation, while France continues to grapple with economic challenges. This article explores the contrasting economic performances of these two major European economies.

In Germany, the economy shrank by 0.3% in 2023, but the government now forecasts a slight contraction of 0.2% for 2024, followed by growth of 1.1% in 2025. This turnaround is attributed to several factors, including the government's efforts to secure energy supplies, streamline planning procedures, and address skilled worker shortages. Vice Chancellor Robert Habeck highlighted that Germany's structural problems, combined with global challenges, have hindered growth since 2018. However, the government's initiatives have helped to stabilize the economy.

In contrast, the French economy faces significant headwinds. Public debt reached a record high in 2024, and the budget deficit is projected to top 6% of GDP. The French government has warned of a "very serious" budgetary situation, with debt rising to 112% of GDP in the second quarter of 2024. The high public debt and deficit have put pressure on France's economic performance, with growth projections for 2024 and 2025 remaining subdued.

The labor market conditions in France differ from those in Germany. While the German labor market has seen steady growth, France's unemployment rate has remained relatively high. In 2023, the French unemployment rate reached 7.1%, its lowest level since 2008, but it is expected to increase to 7.7% in 2024 and 7.8% in 2025. The French government has implemented measures to address the unemployment issue, but the impact on economic growth remains to be seen.

Germany has implemented various policy measures to stimulate economic growth, such as securing energy supplies and streamlining planning procedures. These policies have contributed to the German economy's recovery. However, France faces unique challenges, including high public debt and a relatively high unemployment rate. To address these issues, France may need to consider implementing structural reforms and fiscal consolidation measures to improve its economic performance.