Conference Call

France—Au Revoir Euro?

Meeting date: July 11th, 2012
Start time: 11:00 AM EDT
Duration: 1 Hour
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OVERVIEW

The RGE Western Europe Team discuss our French scenario analysis, and the French banking and housing sectors. The conversation covers:
  • In the context of our three eurozone (EZ) scenarios, our base case envisions a sharp rise in France’s public debt-to-GDP ratio, with the EZ debt crisis weighing heavily on economic growth prospects and the government unlikely to meet its 3% deficit target in 2013.
  • In the short term, President Hollande is unlikely to introduce required public spending cuts or structural reforms and France will therefore remain vulnerable to EZ crisis contagion.
  • French banks are highly leveraged and exposed to multiple distressed economies; in our base case we expect some €80 billion of recap needs over the next few years. 
  • French households are very rich but assets are concentrated in real estate, and income and wealth inequality are high; the temptation for the Socialist government to tax this wealth will likely prove irresistible.