French economy falls back into recession (5/21/13)

French 24's report on the new numbers released about the French economy*.

The French economy has fallen back into recession, a recession affecting the 17-nation eurozone that has lasted for the past 6 quarters.  This recession is statistically longer than the slump that hit the region during the 2008-2009 financial crisis.  According to the article, French GDP has dropped by 0.2 in the first quarter of 2013, which is neither progress nor setback from the previous quarter.  The national statistics agency INSEE reported "weak exports and drop in investment and household spending as factors in the decline."  INSEE reported that investment lost 0.9 percent, business investment lost 0.8 percent and exports lost 0.5 percent in this most recent quarter.  In addition, INSEE also reported household consumption dropped by 0.1 percent, which was extremely surprising despite a particularly cold winter that would cause higher spending on energy.

This entire article is related to the GDP equation described in class...
              GDP = Consumption + Investment + Government + (Exports - Imports)
The article even revealed the numbers associated with each aspect of the equation and it is clear as to why GDP has been dropping in the recent quarters.  The very first thing that the news spokeswoman said in the video related to the story was "Consumption, investments and exports ALL down."  This is clearly the reason why the GDP has been dropping.  Unfortunately, this is not what France needs to know; France needs to know why these aspects of GDP are dropping and how to reverse them.  I would expect that the French government will be doing all it can to get France's economy back to where it used to be.  Unfortunately, it seems that the government is "belt-tightening."  I would assume this would imply increased taxes on consumers and businesses, which is simply hurting every aspect of the economy.  Businesses are simply closing down and consumers just aren't buying goods, which is going to hurt the GDP even more.

I have not been following the European recession for the length of its life but if I had to guess, I would assume that the economy is suffering because jobs simply are being outsourced.  I would expect that France is experiencing things similar to the United States, where huge employers are simply going to where the labor is cheap.  Transportation costs have dropped so much in the past years that it is more profitable to send the raw materials to where the labor is cheap and ship the finished goods around the world from there.  The way to reverse what is happening in France is to create more jobs there.  French companies keep cutting jobs when they need to be creating them.  One of my previous news blog posts was about how a bank was cutting thousands of jobs in Paris.  France needs to get manufacturing back in the country so that exports can increase, as well as consumption because people will have money in their pockets from the jobs.  A policy that could influence this could be to create high taxes on imported goods so that companies will create the goods in state.  This may have some repercussions, however, because other countries will retaliate and they may create their own high taxes on imported goods.

Article: http://www.france24.com/en/20130515-france-economy-recession-insee

*The video showed above is not the video I referenced in my writing.  The video I reference can be found in the article, simple click on the link above.