The French and European Multi-faceted Crisis (Part 1)

France, Germany and Italy are all, to varying degrees, facing formidable economic problems, but also political problems in the case of Germany and France. But so is the EU. Growth estimates for 2024 bear witness to this and growth prospects for 2025 and 2026 are affected. The causes of these problems are quite diverse. Political instability is an immediate cause, but the decline in productivity, coupled with deindustrialization (which goes with a loss of skills in certain sectors), and the drift of the public deficit are structural causes that mark France. Italy, for its part, suffers from a mode of insertion in the EU and the Eurozone that prevents it from fully reaching its potential and adds to the old ills of Italian society. In this context, the energy price crisis—linked to the sanctions taken against Russia—has come to break the recovery that was announced once the COVID-19 crisis was over. Germany has been very hard hit by this energy price crisis, which has also been amplified by the behavior of some companies that have abused their market power, thus revealing a flaw in German regulation. By the way, the possibility that some major enterprises will reshore to the USA to benefit from low energy prices is quite real. However, this energy crisis has been added to structural crises. Germany has sacrificed infrastructure investments for too long to the dogma of balanced budgets and it is facing competition from Chinese companies which, in a context of high energy costs and aging infrastructure, is now becoming a worrying problem. Faced to the United States economic offensive of Mr. Donald Trump, and penalized by energy costs that will remain high until an agreement is reached with Russia, deindustrialization risks accelerating in these three countries. The risk that Europe (and therefore the EU) will be pushed to the side by the undeniable rise of Asia and by American aggressiveness is therefore real.