Fifty years ago. After Charles de Gaulle, Georges Pompidou, his former Prime Minister, became the President of France between 1969 and 1974. He was succeeded by Valéry Giscard d’Estaing from 1974 to 1981, his former Minister of Economy and Finance. The currency at that time was the new Franc. On August 15, 1971, Richard Nixon (President of the United States of America from 1969 to 1974) suspended the convertibility of the dollar into gold to increase the money supply and made the dollar the main reserve currency.
Since that date, there is no longer any link between the Franc and gold. In 1972, the Franc was one of the six currencies of the monetary “snake”, an exchange rate system set up by the six founding members of the European Economic Community. In 1973, the “Pompidou-Giscard” law was passed. It specifies that the Treasury can only borrow to a limited extent from the Banque de France:
“we had an amazing law […]. We forced the state to finance itself on the private financial market at 4 or 5%, and, suddenly, our debt is now at 90% of the gross national product.“
Michel Rocard (Prime Minister from 1993 to 1994), Mediapolis, Europe 1, 22 December 2012. Ultimately, even if in reality it was not until 1993 that the law on the total independence of the Banque de France was passed, it only financed 3% of the French debt. Fifty years ago, the social partners played a preponderant role in the management of Social Security. Unions and employers managed unemployment insurance. For retirement, the Boulin reform in 1971 aimed to significantly raise the level of pensions and in 1972 the supplementary pension became compulsory.
TodayFrance is in the euro zone, its currency has been the euro since January 1, 1999. Since the arrival of François Hollande as President of the Republic in 2012 and “My adversary is the world of finance“, France is still trying to reduce its deficit and external debt despite France’s obligation to respect the Maastricht criteria. The two main criteria provide that a member country must have a deficit of less than 3% of the Gross Domestic Product (GDP), and a debt of less than 60% of GDP These criteria have been suspended until the end of 2023. France has been presided over by Emmanuel Macron since 2017. Before being president, he held the position of Minister of Economy and Finance under the Hollande mandate The Banque de France is one of the 17 banks that make up the EMU (Economic and Monetary Union) system The European Central Bank (ECB) is the main monetary institution of the European Union. is to maintain price stability, in other words to safeguard the value of the euro (Article 127 TFEU).
But here it is: inflation in the euro zone is at 8.9% in July 2022, far from 2% and the euro is at parity with the dollar; for Social Security, the powers of Parliament in matters of social finance are growing and the presence of the State, dating from 1996 with the constitutional revision and the vote of the law on financing Social Security LFSS (Prime Minister Jupé ordinance in 1997 ) strengthens; the unemployment insurance reform has still been in progress since 2019: a less favorable calculation of the allowance, degressivity for high incomes, bonus-malus and longer working hours to benefit from it; for retirement, after the failure of the point-based reform attempt in 2019, several projects are under discussion. After Prime Minister Mauroy’s reform in 1982 and the raising of the retirement age from 65 to 60, the government’s proposal in 2022 is to raise the retirement age to 65. The aim is to reduce the State’s participation in the financing (assigned taxes and duties + CSG).
After the end of the Glorious Thirties, France had its first oil shock between 1973 and 1979. The oil crisis of 1973 began with a geopolitical crisis during the Yom Kippur War. In 1979, the second oil shock started with the Iranian revolution and the war between Iran and Iraq which broke out in September 1980. These events marked the end of Iranian exports and the maintenance of high oil prices over the long term. term. The trigger for the energy crisis of 2020-2022 is the result of the pandemic-related recession and the outbreak of war in Ukraine. France’s answer: make nuclear energy like Pompidou in the 1970s.
Did France have more “crazy money” at the start of 1970 than in 2018? What is France’s place in the world today and fifty years ago?(1)
- France’s budget balance as a % of GDP (in France, the state budget balance is the difference between the level of revenue and the level of expenditure recorded in the state budget). With G. Pompidou, 1969-1974, the public balance was +0.1%. With François Hollande, 2012-2017, it drops to -3.5% and economists estimate the public balance at -5.5% between 2017 and 2022 for Emmanuel Macron.
- Public debt (the public debt is all the financial commitments made in the form of loans). With a few exceptions, public debt has risen inexorably in France since the mid-1970s. It rose from 15% of GDP in 1974 to 112.9% in 2021. last fiscal year in which general government posted a budget surplus.
- Weight of compulsory levies (compulsory deductions (PO) are all taxes and social security contributions levied by public administrations and European institutions). In 1970 the POs were at 33.6%, in 1975 they rose to 35.1%, then in 2021 to 44.3%. There were two declines in POs in 1992 to 40.7% and 2009 to 41.2%.
- France’s trade balance (the trade balance is calculated by the difference between exports and imports during a year). In 1971, exports from France were 17.6 billion euros with imports of 16.7 billion, resulting in a positive balance of 0.9 billion euros. It was from 2004 that France lost market share. In 2009 the balance is negative at -45.4 billion and drops to -84.8 billion in 2021.
- Unemployment (average per decade from 1970 to 2021). From 1971 to 1980: 3.6%, from 1981 to 1990: 8.1%, from 1991 to 2000: 9.8%, from 2001 to 2010: 8.5%, from 2011 to 2017: 9.9% and end of 2021: 7.4%.
- Inflation. Inflation from 1970 to 1980 rose from 5.2% to 13.6%. He was enemy number one and made headlines like today. Inflation at the end of 2022 may exceed 6%. This new inflation is marked by the energy shock as after 1973. The future will tell us if there is a parallel between the turbulence of the present and the two oil shocks of the 1970s.
- Growth. In 1970 the GDP of France was 140,917 billion euros, at the end of 2021 it is 2,500,870 billion. That is per inhabitant 2,422 euros in 1970 and 36,520 euros in 2021, the rate of enrichment of the population is 1,500% in fifty years. France falls and arrives at the 28th place of the countries with the largest GDP per capita.
- Place of France in the world economy. Half a century ago, French GDP represented 4.4% of global GDP. Today it is 2.5%.
- Half a century of inequality. In the 1980s, the share of the richest 1% in global income started to rise again, returning to its pre-war level. This share will reach 13.6% on the eve of the 2008 crisis. According to the latest tax source data from the World Inequality Database, the share of the richest 1% is today at 9.8% of global income. , the same level as that of 2009. In France today the rich are richer but less numerous.
(1) Insee, World Bank, IMF, Country Economy, France-inflation, public-life, public-Senate, etc.