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Global Economic Analysis: France
As the sovereign debt crisis continues to worsen due in large part to incompetent leadership, more attention is being given to France.
Similar to the case seen in the U.S., the decline in domestic demand in France accounted for most losses in output during the 2008 financial crisis.
In contrast, the decline in net exports accounted for the bulk of output losses in Germany. Thus, the crisis-related damage was entirely demand-driven for Germany.
Moreover, while France suffered a more moderate decline in output during the trough of the crisis, its recovery has also been more tepid. Indeed, while both output in Germany and the U.S. had surpassed their pre-crisis levels by 2011 Q1, France still had not by then fully recuperated its output losses associated with the crisis and the recession. The fact that France experienced larger domestic output losses due to the crisis for a more prolonged raises the possibility of more lasting damage to the economy.