The French economy managed to stave off a more severe recession than other advanced economies, but the recovery is fragile and the economy is in need of growth-enhancing and deficit-reducing reforms. France has long supported European economic integration. The country was one of the first six member states to join the European Economic Community (EEC), one of the predecessors of the EU.
France was a founding member of the euro area and was among the first group of countries to introduce the euro on 1 January 1999. Euro notes and coins entered general use on January 1, 2002, replacing the French Franc. France's economy is in the midst of shifting from extensive government ownership and intervention to relying more on market mechanisms. The government has already fully or partially privatised many large companies, banks, and insurers. France's leaders pursue policies that seek to maintain social equality through laws, tax policies, and social spending that aim to reduce income disparity and mitigate the sometimes socially dislocating effects of economic globalisation. Calibrating these policies to have their intended effect can be challenging.
Recent weak productivity growth and low employment levels left France trailing behind the top economic performance on the GDP per capita basis. During the crisis, a decline in exports constituted a significant drag on growth, but domestic demand remained robust. France's comparatively lower reliance on trade, its large social safety net, and timely and decisive government intervention help to explain why France outperformed its peers in 2009, with real GDP contracting by only 2.5% compared to a downturn of 4% in the euro area as a whole.
As GDP is estimated to grow by 1.2% in 2010, the policy focus is now shifting from crisis management to strengthening the foundations of the economy. The International Monetary Fund considers the main challenges facing the French authorities are the need to increase flexibility in labour markets and to raise labour force participation, to further enhance domestic competition, and to eliminate market rigidities that constrain supply and dampen export performance.
France's Economy - Key Facts The Republic of France has a population of more than 64 million people. It includes four overseas departments in Martinique, Guadeloupe, Reunion and French Guiana. France is the second-largest trading nation in Western Europe (after Germany). The rest of the European Union is France's most important trading partner, importing 62% of France's exports and supplying 59% of its imports.
The World Economic Forum (WEF) Global Competitiveness Report for 2010/2011 ranked France 15th out of 139 countries in terms of competitiveness. The country's infrastructure is among the best in the world (ranked 4th). Health, education and innovation are other clear strengths. On the other hand, France's labour market efficiency continues to be ranked low (60th) because of the rigidity of wage determination and the strict rules on firing and hiring, as well as poor industrial relations in the country.
The World Bank's Doing Business Report ranked France 31st out of 183 counties.
According to the European Commission's Spring 2010 forecast, for 2010 as a whole, real GDP will grow by 1.2%. In 2011, GDP is expected to grow by 1.5%, supported by domestic demand. Macroeconomic stability still raises alarm bells for the future: The deficit reached 7.5% of GDP and is expected to further increase in 2010 to 8% of GDP. While the deficit is set to improve in 2011, debt is approaching 90% of GDP. France has committed in its 2010-2013 Stability Program, presented to the European Commission on 1 February 2010, to reduce its national deficit to 3% of GDP by 2013.