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Old Posted Feb 18, 2009, 7:02 PM
New Brisavoine New Brisavoine is offline
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A consequence of the high birth rate in France highlighted in the Financial Times:
France’s baby boom secret weapon to save economy

Financial Times
February 9, 2009

President Nicolas Sarkozy unveiled his long-awaited rescue plan for the French motor industry. In exchange for some €6bn ($7.8bn) of loans, Peugeot-Citroen and Renault have promised not to cut jobs or shut down factories in France.

The Paris government is determined to keep industry alive in France – especially the car industry which is one of the country’s largest direct and indirect employers and one of its biggest exporters.

Yet the unspoken truth of the French economy is that it is in fact becoming increasingly service-led. And it is likely to become even more so as the French population continues to grow above the European average. There has been a mini baby boom under way for some time in France, and the economists of Société Générale believe that this could well be the country’s secret weapon to cope with the current crisis. While the rest of Europe worries about consumer spending, SocGen has found that families with children spent an average 35 per cent more last year than childless couples or single people.

Moreover, 69 per cent of families have two cars per household against just 35 per cent for the rest of the population on average. Families also spend 35-40 per cent more on leisure and 55 per cent more on transport. But perhaps the most important advantage is the fact that France has a significantly higher population of young people than old, offering some comfort as the post-war 65-year-old generation of former baby boomers move into retirement on state-funded pensions.

France has other buffers against the crisis – not least the fact that household debt remains low and household savings are still high. At the same time, the high number of public sector workers and the country’s social safety net is helping to cushion the impact of the global slowdown. Cynically too, the country’s failure to create a strong export-led industry like Germany means that it will not feel as much of the pain as its big capital goods exporting neighbour on the other side of the Rhine.

The government is nonetheless worried, and measures such as Monday’s car package show the extent to which Paris feels the need to take vigorous short-term action. But the government should perhaps be thinking a little more long-term.

For if France now has a booming fertility rate – 834,000 babies were born last year – that is keeping the overall population stable while its European neighbours are all showing declines, it is precisely because previous governments set the framework in place to encourage women to have babies.

Highly attractive tax breaks for families with three children or more, together with readily accessible child care from the earliest age are largely behind the mini-baby boom. The policy in part was developed to defend and promulgate French language and culture against the creeping dominance of English.

But it was also designed to bolster the workforce by allowing mothers to continue working, making up for the post-war deficit of working males. It is quite understandable that President Sarkozy is concentrating on fighting the uncertainties caused by the crisis with short-term fixes. Yet his real test will be to match his predecessors with long-term initiatives that will provide the work for all these baby boom babies when they come of age in a decade or more.

That implies, among other things, allowing car manufacturers and other industries to restructure and modernise to ensure that in the long-term they will be still around and flourishing to employ this new generation.
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