FRANCE

RITESH CHOUDHARY
FINANCE 2
SS 08/10
ROAD MAP
• History of France
• About France
• Macroeconomic Factors
• Monetary Policy
• Balance of Payments
• FDI
• Capital account convertibility
• Political Risk Analysis
• Scams
• Conclusion
Currency history of France
• Due to its decimal structure the franc can only be a
creation of the French Revolution. One of the fathers of
the new coin is the gentleman shown here: Napoleon
Bonaparte

• The French currency had been weakened by inflation and

the constant degradation of the metals used for centuries.

• At the beginning of the French Revolution the inflation

increased and saved assets continued losing value.
People took their gold and silver abroad to save them.
•
• As a result emergency currencies and paper bills were
issued. In 1794 the leaders decided in Paris that the
French monetary system had to be reorganized and
reformed.
 Currency history of France
• One year later, in 1795, the new currency, the franc based
on 5 grams of silver was officially issued.
franc was adopted by Belgium in 1832 and later, by
Switzerland in 1850
Even the German mark was strongly influenced by
the franc
and remained the national currency until the
introduction of the euro in 1999 (for accounting
purposes) and 2002 (coins and banknotes).

French franc against the euro was set at a fixed parity

of 1 EUR=6.55957 FRF
 INTRODUCTION OF FRANCE
• France officially the French Republic is a country located in
Western Europe, with several
overseas islands and territories located on other continents.
• Is bordered (clockwise from the north) by Belgium, Luxembourg,
Germany, Switzerland, Italy, Monaco, Andorra, and Spain.
• France covers 547,030 square kilometres (211,209 sq mi )
• CAPITAL – Paris , OFFICIAL LANGUAGE –French
• ECONOMY – 5th Largest , POPULATION- 65.1mn
• The French Republic is a unitary semi-presidential republic with
strong democratic traditions
• The French parliament is a bicameral legislature comprising a
National Assembly and a Senate.
BANQUE DE FRANCE

• Headquarters Paris, France

• Established18 January 1800

• Governor Christian Noyer

Exchange Rate Regime

• From 1971 to 1974, France maintained a two-tier

exchange rate structure, composed of a fixed
Commercial Franc Rate (for foreign trade
transactions) and a freely fluctuating Financial
Franc Rate (for all other remittances )
• In 1979, France participated the ERM of EMS. In
accordance with this agreement, France maintains
the spot exchange rates
• In January 1, 1999, France participated in a
currency union (EMU) comprising 11 members of
the EU. Internal conversion rates in respect to the
national currencies of EMU participants were fixed
to the euro, whereas the external exchange rate of
the euro is market determined.
Macro Economic Analysis

• GDP GROWTH RATE -1.2% ( April 09)

• GDP - composition by sector: agriculture: 2.2%
industry: 20.3%
services: 77.4% (2008 est.)
• $2.097 trillion (08) $2.083 trillion (07)
• $2.074 trillion (06)
• Investment : 21% of GDP (08)
• Inflation rate : 1% (08)
• FOREX RESERVES :125,222 mn $ (09)
• Exchange rates: euros (EUR) per US dollar -
0.6827 (08), 0.7345 (07)
Macro Economic Analysis

• Budget: revenues: $1.439 trillion

• expenditures: $1.525 trillion (08)
• Public debt: 67% of GDP (08)
• Infrastructure:
• 31,939 kilometers (19,846 miles) of rail lines .
• 828,000 kilometers (514,605 miles) of roads .,
• 47 per cent of the waterways are heavily used.
• 474 airports in France,
Balance Of Payments France

EURO MILLIONS 2006 2007 2008

Current account -9,205 -18,879 -44,014

goods -30,395 -40,461 -59,087

services 13,411 15,000 14,457

income 29,688 29,309 24,843

Current transfers -21,909 -22,727 -24,227

Balance Of Payments France

EURO 2006 2007 2008

MILLIONS

Capital account -197 1,854 696

Financial account 6,049 37,644 78,112

Net errors and 3,353 -20,619 -34,794

omissions
Official reserves -8,775 -478 8,518

NOTE- official reserves already being added in financial

account , given only for information.
GRAPHICAL REPRESENTATION OF
BALANCE OF PAYMENT
EXPORTS OF FRANCE
800
700
600
500
400
exports
300
200
100
0
• 2006$7612007
Exports: 2008
billion (08 )
• Commodities: machinery and transportation equipment,
aircraft, plastics, chemicals, pharmaceutical products, iron
and steel, beverages
• Exports - partners: Germany 14.9%, Spain 9.3%, Italy 8.9%,
UK 8.1%, Belgium 7.3%, US 6.1%, Netherlands 4.1% (08)
 IMPORTS OF FRANCE
900
800
700
600
500
400 imports
300
200
100
0
2006 2007 2008
• Imports: $833 billion (08 )
• Imports - commodities: machinery and equipment,
vehicles, crude oil, aircraft, plastics, chemicals
• Imports - partners: Germany 18.9%, Belgium
11.4%, Italy 8.4%, Spain 7.1%, Netherlands 7%,
UK 5.6%, US 4.4%, China 4%
FOREIGN DIRECT
INVESTMENT OF FRANCE
EURO 2006 2007 2008
BILLIONS

FDI -88,222 -123,523 -136,774

OUTWARD

FDI INWARD 57,273 75,892 66,338

NET FDI -30,949 -47,631 -70,436

 FDI FRANCE

100,000

50,000

0
FDI IN
FDI OUT
-50,000

-100,000

-150,000
2006 2007 2008
CAPITAL ACCOUNT
CONVERTIBILITY
The French government began to loosen its
draconian exchange control sat the end of 1983
• In 1985, the socialists began to liberalize virtually
all transactions, including authorizing Eurobond
issues denominated in French francs.
• When the Right-wing government of Jacques
Chirac Came to power in 1986 and 1988 France
continued to liberalize, though the pace slowed and
focused on other transactions, such as the
purchase of secondary residences abroad and
exchange purchases and sales by firms.
• The socialists finished the task upon their return
to power.
• In January 1990 was France’s capital account fully
liberalized.
Regional Comparison
Country Risk Tier
• France CRT-1
• Germany CRT-1
• Spain CRT-2
• Italy CRT-2
• Switzerland CRT-1
• United Kingdom CRT-1
SCAMS IN FRANCE
• President Jacques Chirac (UMP) was accused by
the Canard enchaîné of disposing of 50 million
euros in a Japanese bank account in the Tokyo
Sowa Bank owned by Shōichi Osada, who has
since been sentenced to prison in Japan. (2006)

• 2005 THE CIVIL UNREST.

• April 2006 prime ministry Dominique de Villepin,

was accused of spying over his political rival
Nicholas Sarkozy in 2004
THANK YOU