The recent complete change in the strategic orientations of the Fed and the ECB tends to entrench real short- and long-term interest rates in abnormally negative territory.
This change can be likened to a form of ‘monetary headlong flight,’ even if the prices of goods and services seem to be largely under control. This strategy runs counter to the process of spontaneous consolidation of the global business cycle, after 10 years of a modest and non-inflationary recovery in economies now constrained by their production capacities, and following the warning given by the temporary collapse of stock markets at the end of 2018.
France is not expected to escape the general slowdown in demand but should benefit both from the measures taken by President Macron and from the buffer effect that traditionally comes into play in the event of a downturn in business activities and world trade thanks to the size of its public sector and the country’s lower exposure to manufacturing activities. French GDP (1.3% in 2019, 1% in 2020, then a return to potential growth of 1.3% per year in 2021-2023) is expected to outperform the euro zone overall by a slight margin, paradoxically benefiting from the lack of French competitiveness in the export markets faced with sluggish world trade and taking advantage of the addiction to the Keynesian-style recovery financed by the failure to curb the growth in public debt.
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