ECONOMIC OVERVIEW OF SPAIN AND FRANCE 10
Economicoverview of Spain and France
Inthe year 1986, Spain joined the EU, since then the country enhancedinto a dynamic economy. It has been a worldwide champion of humanrights and freedom. Of late, the government has focused on themeasures to overturn economic depression that had begun in the year2008. Serious measures that got implemented so as to decrease thehuge budget deficit and assure the foreign investors led to highunemployment rates in Europe (OECD,1998).
Accordingto Elizabeth & Marie (2002), Spain went through an extendedrecession in the wake of worldwide financial problems. In the year2009, the GDP contracted by a rate of 3.7%, which ended asixteen-year growth drift, and it went on contracting through themost of the year 2013. In the late 2013, economic growth resumed,although modestly, but as credit narrowing in the private area, ahigh unemployment went on to weigh on investment and domesticconsumption.
However,exports were elastic throughout the economic depression. Due to thisthere was an offset reduction in domestic consumption which assistedto bring the current account of Spain into surplus in the year 2013since 1986. The rate of unemployment rose from an eight percent inthe year 2007 to over twenty-six percent in the year 2013. Thisstrained the public finances of Spain since the spending on socialbenefits raised and the revenue decreased. Gradually, Spaindecreased the deficit to around seven percent of GDP in the year2013, which is above the 6 percent goal that had got negotiatedbetween EU and Spain (Harrison & David, 2013).
Accordingto Harrison & David (2013), the public debt has risensignificantly from 60.1 percent of GDP in the year 2010 to 93.4percent in the year 2013. This has been achieved by moderating thelabor costs, lowering inflation, and raising the labor productivityso as to enhance the interest of the foreign investor in the economyand to decrease the borrowing costs of the government. The effortsof the government ongoing to execute reforms- pension, education,labor, health, and tax- are meant at supporting the sentiment ofinvestor. Also, the government has shored up stressed banks that areexposed to the depressed domestic construction of Spain and realestate sectors by effectively completing an EU- fundedrecapitalization and restructuring program in the year 2013.
Tillthe year 2008, the economy of Spain was viewed as one of the mostvibrant within EU. Nevertheless, the mainstays of the economy wereconstruction industry, booming housing market and a tourism, and sothe worldwide economic crisis of the year 2008-2009 hit the countryvery hard. The bursting of the housing bubble put Spain into adangerous recession and by the end of the year 2011 the country washit by unemployment rate of around 23%, and by then it was thehighest unemployment rate in Europe. By the year 2013, this hadincreased to 27.2 %. The measures that the government took so as toreduce the amount of debts ignited the wave of resistance and gavebirth to the indignations movement. Spain has most of the IberianPeninsula, the Balearic Islands, two North African and Canary Islands(Bonnie & Alfonso, 2013).
TheSpanish institution gave a report stating that 25 percent of theSpain’s people live below the poverty line as the state struggleswith a high rate of impoverishment among the states of European. According to the report given by the social council and Spanisheconomic, unemployment among youth is expected to raise socialinequality and poverty in future, giving a warning that educationcuts and welfare could have awful results for future generation.Fernando Valdes of CES stated that there are countries wheregenerations have been let down by education systems and somecountries never let the young people get to the workforce. Thereport added that the level of scarcity from social services is highin the Spain population (Bonnie & Alfonso, 2013).
The level ofunemployed people in Spain has hit a level of 24 percent, and theaddition of 50percent rate of unemployed youth. Battered by theworldwide financial depression, the economy of Spain collapsed into adownturn in the second half of the year 2008, taking several jobswith it. The worst euro zone debt predicament has increased thefinancing costs concerns of Spain that the country would seek thebailout of European like Greece.
Thepolitical and economical turmoil of France is going deep and recentlythe real forecast of the GDP is of 0.3% in the year 2014 and 0.8% inthe year 2015. In august the president of beleaguered, FrancoisHollande, suspended his government so as to respond to an anti- rigorrevolt by important left-wing ministers. The second reshuffle of Mr.Hollande’s in a period of six months was a gamble of high-stakes(Joanna, 2005). If there is a failure, the results will be grave forthe accomplishment of economic reforms that the France requiresbadly.
Accordingto Joanna (2005), the economy of France is diversified in all areas.The government has either partially or fully privatized several bigcompanies, which include Thales, France Telecom, Renault, and AirFrance. Nevertheless, the government has maintained a strongexistence in some areas, especially, defense, public transport, andpower industries. France is the country that receives severalvisitors with at least over eighty tourists per year it is the thirdlargest income earner in the world from tourism. The leaders ofFrance are committed to capitalism where they have maintained socialequity through tax policies, laws, and spending on social that lesseneconomic equality. The GDP of France stagnated in the year 2012 and2013.
Therate of unemployment in France, which included overseas territoriesrose from 7.8% in the year 2008 to 10.2% in year 2013. Lack of jobsamongst the youth in metropolitan France went down from a high of25.4% in the quarter of the year 2012 to 22.8% in the quarter of theyear 2013. Huge spending and slow growth than expected growth havestrained the public finances of France. The deficit of budget rosehighly from a rate of 3.3% of GDP of the year 2008 to a rate of 7.5%of GDP of the year 2009, then it improved to a rate of 4.1% of GDP inthe year 2013, whereas the public debt of France rose from a level of68% to around 94% in the same period.
Accordingto France EU obligations, it is aiming a deficit of 3.6% of GDP inthe year 2014 and that of 2.8 in the year 2015. The government ofpresident of Francois Hollande has executed huge state support foremployment. Also, the separation of traditional deposit of banks andthe activities of lending from a bit speculative businesses, troughthis increased the personal tax rates and top corporate, whichincludes a 75% tax on wages of above one million Euros, and hiredaround sixty thousand teachers during his term. In January the year2014, Hollande suggested a responsibility pact that aimed at reducingcosts of labor in return for a commitment of business to create jobs. Despite the fiscal challenges and stagnant growth, the borrowingcosts of France have reduced in the recent years since the investorshave remained attracted to the liquidity of bonds of France.
InFrance, poverty has decreased by 60 percent in 30 years. Even though,it affected fifteen percent of the population in the year 1970, inthe year 2001 around 6.1% of the population was living below thepoverty line. In the mid 1960s, Jules approximated that around 20% ofFrance population were living in poverty (Nicholas, 1996).
In1975, a tax-free allowance that started at 665 Euros for children whowere below ten years. It provided a significant amount of support forpeople living on low income, and its link with direct taxation meantthere was a great support to families that were poor than in anyother country. A family with two parents or guardians, and fourchildren on 66 percent of average income gained an amount after beingtaxed and an allowance that is equal to 49.4% of its earning comparedwith 8.2% in the United Kingdom. However, during the same year,INSEE realized that any income level disposable wage per head was lowin big families than those with small families. The cost ofmaintaining the family weighed heavily especially on families headedby a worker who is lowly paid. According to an estimate done in thepast years, the use of 1500 francs net every month for those infull-time job 24.5 percent of women and 42 percent of men gotpaid lowly (Nicholas, 1996). The level of workers who got paid lowlywas high in personal services like textiles, hotel and catering andhairdressing.
Bycomparing average France workers, foreign workers seemed to be givenjobs in the lowest and hardest paid jobs and resided 0n poorconditions. A research done showed that foreign workers earned a 17percent lesser than their foreign colleagues. The nationalcommission on social, cultural, and family affairs projected thataround 5 percent of the population should be regarded asliving ina state of poverty. Research done by Rene Lenoir, Lionel Stoleru, andSerge Milano showed that around 10 percent and 14 percent of thepopulation lived in paucity. A report given by EEC stated thataround 14.8 percent of families in France lived in destitution thisgets defined as surviving below the verge of 50n percent mean annualearning. In 1990s, it was indicated that around two million peoplewere living in intense poverty in France (Nicholas, 1996).
Asindicated the poor were most the retirees. However, the trend gotreversed in 2000’s with an increase in jobless among the youthwhile the poverty level among the old people decreased from 27.3percent to 3.8 percent, but among those in the workforce it rose by a385 in average of thirty years. Welfare programs have had asignificant impact in low earning households, and in the year 2002,they may have shown more than 50% of the families earning.
Sincethe year 2007, France just like any other country has had to get usedto new worldwide economic realities. It is adapting through themeasures meant to modernize the economy, but in France, modernizationis, usually, a difficult process. France did not suffer as UK didand several other economies from the economic depression in 2007 butafter three years it was getting back to its position. Even though,the Sarkozy government was undertaking various reforms like raisingthe age of retirement, it failed to grip the most pressing crisis ofthe French economy (Joanna, 2005). First it was the excessive highrate of taxation and seconds that the failure of competitiveness ofFrench business in the worldwide market.
Inthe year 2012, as there was a new government set to be in power, theeconomy was lethargic, and the deficits were high. President Francoismade a promise to balance the country’s budget by the year 2017,but in the meantime the national debt of France will continueincreasing before it begins to decrease. However, there is asignificant uncertainty among the analysts questioning whetherHollande will be in a position to meet the challenge. Initialmeasures that the government stated, like rolling the retirement ageback to 60 years for people who have worked over 41 years, andforming new jobs in the education sector have been viewed in severalquarters as liable of damaging the economy of France than stimulatingit.
Ayear later in the job, Hollande has been unable to take essentialmeasures to cut down unemployment and put back Frenchcompetitiveness. The apprehensive reduction in spending of thepublic has been announced, even though it is causing havoc on the taxand spends of Hollande, it seems unlikely to generate the stimulusthat the economy of French need. However, in the meantime the rate ofjoblessness continues to rise. The GDP rise of 0.5% in the quarterof the year 2013 was because of government spending and consumerspending, and not to the increased production, and several analystsfeel that it may not stay for long.
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