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2008-09-26 04:33:38
Unlike Britain, the US and many other countries, France appears to be
weathering the credit crunch storm in reasonable shape.
The BBC's Emma Jane Kirby asks if other nations should take a leaf out of the
thrifty Gallic book?
If I had to use one word to describe France's financial system, the word I
would choose would be "cautious".
French banks are immensely careful about whom they lend money to and, to limit
risks, they spread their investments much more widely than those in the US or
UK.
Only about a quarter of banking activity is related to investment banking and
dealer-broker activity - the rest is all to do with retail banking.
This meant when the credit crunch bit, the French banks were hit a lot less
hard than those in many other countries.
But it is not just about banking investments - this country as a whole simply
takes far fewer risks.
In London... it was as if wealth was something you could get from a bank, it's
a sort of miracle people seem to believe in England
Francois Artignan, banker
Take the level of household debt. In France, it is at 47% of GDP, while in the
UK it is well over twice that.
Its not that temptation does not exist in France - the lure of consumerism is
just as strong as it is elsewhere.
But it is very difficult to spend money you do not have in France.
French credit cards are little more than debit cards, so there is no question
of simply sticking a couple of flat screen TVs on your credit card and hoping
to pay for them later - if there are insufficient funds in your account, your
bank will immediately block the transaction.
In the wealthy suburb of St Germain-en-Laye, just outside Paris, I met Francois
Artignan, a well-to-do banker who moved back to France two years ago after a
long stint of living in the UK.
Francois admits he misses the buzz of London living but says he was alarmed by
the way so many British people lived on their credit cards and never saved
money.
"It's true that you can note a big difference in consuming behaviours between
the French and the English," Mr Artignan says.
"People here don't believe you can just put your debts together and get them
refinanced... But in London... it was as if wealth was something you could get
from a bank, it's a sort of miracle people seem to believe in England.
"It seems to me people there are very keen to use up all the money they have,
and that's a worry when you wonder how people are going to have money for
retirement for instance," Mr Artignan says.
Sluggish growth
From his Paris office, the chief economist for market analyst Xerfi, Alexander
Law, has been comparing the spending patterns of France and Britain.
Mr Law, who has dual nationality, believes that innate French prudence has
saved it from disaster.
"Generally in France you spend what you have and not more," he explains.
"In the US and the UK, the economy has been driven by household spending,
consumption has been driven by credit, and a lot less in France, so that's why
when there were periods of expansion France grew a lot more slowly than the UK
and the US but conversely when it's slowing down, it will slow down in a more
moderate fashion than the UK or the US."
France's rate of growth is horribly sluggish - this year it looks set to hover
around just 1%, meaning its likely to be way off target for meeting its promise
to the EU to bring its budget deficit back under control by 2012.
But although its slow economy is hardly the envy of the world, its reluctance
to tie its economy into the housing market in the same way the US did has also
meant that when the American sub-prime market collapsed, it did not drag the
French market with it.
There are far fewer household owners here than in the UK - about 57% of French
people are on the property ladder, compared to 70% in the UK.
Although a high earner, Mr Artignan was 43 before buying his first home because
in France, unless you have a big deposit, you can forget begging the banks for
a huge loan.
Two conditions
President Nicolas Sarkozy is trying to push France into becoming a nation of
house owners by building thousands of cheap new homes.
But France still believes in strict rules and regulations, Finance Minister
Christine Lagarde says.
"Expect two conditions - a down payment of 20% of the value of the house plus
mortgage [repayments] which will not exceed 30% of income.
"You already have a pretty good safety net there and clearly no real estate
financing similar to the sub-prime market that has existed in the US and which
has hurt the financial system so much," Ms Lagarde says.
France has long been feeling the pinch of the global rise in food and fuel
prices and many people here complain that their spending power is falling fast.
In France, 46% of people chose to stay home for their summer holiday this year
rather than splashing out on an expensive break away, and so many people are
cutting back on dining out that some 3,000 cafes and restaurants went out of
business in the first three months of this year.
Sparse spending means sparse growth - but should other countries take a leaf
out of the parsimonious Gallic book?
"I'm not suggesting that we have the basic principles right, I'm not suggesting
that we can teach the world lessons," Ms Lagarde says.
"But I think it will be for each and every category of players, traders,
regulators, supervisors, to examine what they have done, what they should have
done and what they should be doing in the future to bring a bit more morality
into the system.
"I think we have let this world of fantasy and virtuality overcome reality...
There have to be more principles, more discipline and a bit more reality," the
minister says.