“The graveyards are filled with indispensable men.” – Charles De Gaulle
Among the ironies of Sunday’s march in Paris were leaders from Saudi Arabia and Russia demonstrating on behalf of free speech, while US leaders avoided the procession. But irony aside, the direction France now takes matters immensely to the rest of the world. Initial reports indicate that over 5% of France’s population attended Sunday’s rally.
This matters because France is Ground Zero for globalization. Without France there is no European Union and no Euro. France’s economy is stagnant, and highly regulated. Most retail stores, for example cannot open at all on Sundays. France ranks 70th in the world in economic freedom, well-behind Canada (6th), the US (12th), Germany (18th), and even Ghana (66th). At least it is ahead of former colonies Morocco (103rd) and Tunisia (109th).
After last week’s terrorist attacks on Charlie Hebdo, France could move in a nationalist, nativist direction, seeking to protect its economy with more regulation and barriers. We know how that would work out. Or it could open up and deregulate its economy—currently the 5th largest in the world, and second largest in the EU—to unleash it’s inherent potential for growth. The current finance minister has proposed some modest reforms moving in this direction.
The Euro is both an economic and political project. For all its flaws, it has lowered trade barriers within Europe and facilitated significant financial projects. It’s success is critical to global economic growth. And France is at the heart of the Euro. They’re the bridge between Germany’s economic engine and the troubled economies of southern Europe.
That’s why Paris is important.
Douglas R. Tengdin, CFA
Chief Investment Officer
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