Macroeconomic Problems In France

France is considered a very prosperous nation. The prosperity of this nation was mostly from the huge economic changes that were made after the 1940’s. This was because the French government started to modernize the economy. They developed new methods of production and trade through a series of national plans. Although, they still have macroeconomic problems just like every other country.

Macroeconomics are economic concepts and theories that apply to the economy as a whole. Macroeconomic problems are issues such as inflation, balance of payments disequilibrium, fluctuations in exchange rates, depreciation in currency, and the decision as to whether a country should have a floating or managed exchange rate. However, France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that mitigate economic inequality.

France’s main source of currency is the Euro. As with most countries, France does their best to base their currency off the U.S. Dollar. As of 2011 (World Book Encyclopedia), the Euro was equal with the U.S. Dollar. Unfortunately, since then the value of the Euro has declined over the years. According to the exchange rate, in 2012 it was at .78, and in 2013 it was at .76. This shows that the Euro is depreciating.

This follows into the matter of inflation. France has an inflation rate for consumer prices of 1.1% (2014). This apparently went down over the last year as in 2012, it was at 2.2%. Even though, this is relatively low, which is why they are such a prosperous nation. They are especially low when comparing their inflation rate with some countries such as Zimbabwe, who has an inflation rate of 8.5% (2013). Compared to the w...

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...g opposed active exchange rate intervention. Hollande then contradicted their point of view by saying “reform of the international monetary system was indispensable.” He feels that France needs to decide on medium-term exchange rate and act on an international level to protect their own interests. There is the fear in several countries that single currency countries whose efforts to improve their competitiveness could be destroyed by the Euro, which has been rising in value. This fear may soon be put to rest though, as the Euro has had recent strength.

The macroeconomic problems in France are relatively minor compared to the ones of other countries. Despite stagnant growth and fiscal challenges, France's borrowing costs have declined in recent years because investors remain attracted to the liquidity of France’s bonds. Thus, they are a fairly strong country.