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France

France

Population 64.6 Million
GDP 38,178 $US
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Synthesis

major macro economic indicators

  2015 2016 2017(f) 2017(f)
GDP growth (%) 1.1 1.2 1.8 1.8
Inflation (yearly average, %) 0.1 0.3 1.1 1.2
Budget balance (% GDP) * -3.6 -3.4 -2.9 -2.8
Current account balance (% GDP) -0.4 -0.9 -1.3 -1.1
Public debt (% GDP) 95.8 96.5 96.8 96.8

 

(f): forecast

 

SECTOR RISK ASSESSMENTS

 

STRENGTHS

  • High-quality infrastructure and public services
  • Skilled and productive workforce, dynamic demographics
  • Powerful tourism industry
  • Competitive international groups (aerospace, energy, environment, pharmaceuticals, luxury goods, agrifood, retail)
  • Global agricultural leader
  • High level of savings

WEAKNESSES

  • Insufficient number of exporting companies, loss of competitiveness and market share
  • Weakening level of product sophistication, insufficient focus on innovation
  • Low employment rate among younger and older workers
  • Room for improvement in public spending
  • High level of public debt, private debt on upward trend

Risk assessment

Internal demand will continue to drive growth

Growth picked up in 2017, in particular thanks to accelerating business investment and a rebound in electricity exports and tourism. While household consumption slowed in 2017, following exceptional favourable events in 2016 – a particularly cold winter (heating, clothes purchases); the Euro football championship –, it is expected to bounce back in 2018 thanks to higher purchasing power. Real wages are expected to rise, because of incipient labour market tensions (growing number of companies declaring difficulties with recruitment). While job creation in the commercial sector (+300,000 in the first half of 2017 year-on-year) is expected to remain dynamic, the cut to one third of assisted jobs (-110,000 between 2017 and 2018) will slow the downward trend of the unemployment rate, which will remain at about 9%. High levels of confidence and particularly favourable credit conditions will continue to drive robust household consumption and investment, which will specifically benefit sectors such as automotive, retail, and construction (building permits up by 12% year-on-year at end October 2017). These same factors will encourage business investment, which should therefore remain dynamic in 2018. Competitiveness and Employment Tax Credit (CICE) and low energy costs have helped manufacturing companies to rebuild their margins (35.3% in 2016, highest level since 2002). Nevertheless, as investment is conducted largely through credit, corporate debt will continue to rise (72% of GDP in Q2, +2 percentage points year-on-year). Insolvencies will continue to decline in 2018 (-2% after -2.6% in 2016 and -8% year-on-year in November 2017) and business creation will grow (+6% year-on-year in November 2017).

The external contribution is likely to be less negative in 2018, thanks to accelerating exports in a context of strong demand from partners and cost/competitiveness gains recorded in recent years. With the effects of the terrorist attacks of 2015 and 2016 fading, tourism rebounded in 2017, and is expected to accelerate further in 2018. Hotel stays grew 4.8% year-on-year over the first nine months of 2017, thanks to the return of foreign tourists (+8.1%), a trend which should be confirmed in 2018. At the same time, imports will continue to be driven by capital goods needed for corporate investment and by higher oil barrel prices, which should nonetheless be offset by the slight appreciation of the euro.

Despite the fading effects of lower energy prices, inflation is expected to remain low, notably because of lower telecommunications prices (increased competition).

 

Heavy debt burden fuelled by twin deficits

The balance of goods runs a structural deficit, as France is a net energy importer. In contrast, the balance of services is in surplus thanks to tourism revenues. Since 2015, the goods and services balance excluding energy has become negative, as the manufactured products deficit has steadily widened due to the delocalisation of automotive production and of investments in machines. This deficit is partially offset by the income surplus (dividends of French subsidiaries abroad). The current account deficit is mainly financed by the issuance of debt securities held by non-residents.

Due to the limited leeway on the budget, although the 2018 finance law contains several tax cuts (30% flat-rate tax on financial income, replacement of net worth tax by a property tax, removal of employee contributions, cuts to council tax), these will be offset by a 1.7 percentage point rise in the CSG (General Social Security Contribution) and spending cuts totalling EUR 15 billion (housing, health, local authorities, assisted jobs). As a result, the public deficit should remain below the 3% threshold in 2018, but the public debt - one of the highest in the eurozone - will remain one of the few not to decline.

 

Continuation of reform agenda in 2018

President Emmanuel Macron, elected in May 2017, has an absolute majority in the National Assembly via his party, La République En Marche!. During the first months of his term, President Macron passed the aforementioned fiscal measures, as well as a reform aimed at making the labour market more flexible. Although the government announced reforms to unemployment insurance for 2018 and to vocational training, these will be much less far-reaching than the texts already passed. In contrast, reform of the pension system (removal of special regimes), which is due to be launched in 2018, could lead to significant union protests. Nevertheless, President Macron enjoys fairly high popularity ratings and strong legitimacy following his victories in the presidential and parliamentary elections, while the main opposition parties (Socialist Party on the left and Les Républicains on the right) are undergoing a period of rebuilding. Although one of President Macron’s commitments was to boost the building of Europe, any progress will depend on the political situation in Germany.

 

 

Last update : January 2018

Payment

Bank cards are now the most commonly-used form of payment in France, although cheques are still widely used. In value terms, cheques and transfers are still the most popular forms of payment.

If a cheque remains unpaid for more than 30 days from the date of first presentation, the beneficiary can immediately obtain an enforcement order (without need for further procedures or costs). This is based on a certificate of non-payment provided by the creditor’s bank, following a second unsuccessful attempt to present the cheque for payment and when the debtor has not provided proof of payment within fifteen days of receipt of a formal notice to pay served by a bailiff (article L. 131-73 of the monetary and financial code).

Bills of exchange, a much less frequently used payment method, are steadily becoming rarer in terms of number of operations – although in terms of total value they remain important. Bills of exchange are still an attractive solution for companies, as they can be discounted or transferred and therefore provide a valuable source of short-term financing. Moreover, they can be used by creditors to pursue legal proceedings in respect of “exchange law” (droit cambiaire) and are particularly suitable for payment by instalments.

Bank transfers for domestic or international payments can be made via the SWIFT electronic network used by the French banking system. SWIFT offers a reliable platform for fast payments, but requires mutual confidence between suppliers and their customers. France is also part of the SEPA network.

Debt collection

Unless otherwise stated in the general sales conditions, or agreed between the parties, payment periods are set at thirty days from the date of receipt of goods or performance of services requested. Interest rates and conditions of application must be stipulated in the contract – otherwise the applicable interest rate is that applied by the European Central Bank in its most recent refinancing operations. Throughout the first half of the year in question, the rate applicable is that in force on the 1st January and for the second half year in question, the rate applicable is that in force on the 1st July.

 

Amicable phase

During this phase, the creditor and the debtor try to reach an amicable solution via direct contact, in order to avoid legal procedures. All documents signed between the parties (such as contracts and invoices) are analysed. Where possible, the debtor can be granted an extended time period to pay his debts, with the period’s length negotiated as part of the amicable settlement.

 

Legal proceedings

Order for payment (injonction de payer)

When a debt claim results from a contractual undertaking and is both liquid and undisputable, creditors can use the injunction-to-pay procedure (injonction de payer). This flexible system uses pre-printed forms and does not require the applicants to argue their case before a civil court (tribunal d’instance) or a competent commercial court (with jurisdiction over the district where the debtor’s registered offices are located).

By using this procedure, creditors can rapidly obtain a court order which is then served by a bailiff. The defendant then has a period of one month in which to dispute the case.

 

Fast-track proceedings

Référé-provision provides creditors with a rapid means of debt collection. If the debtor is neither present nor represented during the hearing, a default judgment can be issued. The court then renders a decision, typically within seven to fourteen days (though same-day decisions are possible). The jurisdiction is limited to debts which cannot be materially contested. If serious questions arise over the extent of the debt, the summary judge has no jurisdiction to render a favourable decision. Judgments can be immediately executed, even if the debtor issues an appeal.

If a claim proves to be litigious, the judge ruled competent to preside (juge des référés) over urgent matters evaluates whether the claim is well-founded. If appropriate, the judge can subsequently decide to declare himself incompetent to rule on the case. Based on his assessment of whether the case is valid, he can then invite the plaintiff to seek a ruling through formal court procedures.

 

Ordinary proceedings

Formal procedures of this kind enable the validity of a claim to be recognised by the court. This is a relatively lengthy process which can last a year or more, due to the emphasis placed on the adversarial nature of proceedings and the numerous phases involved. These phases include the submission of supporting documents, written submissions from the litigants, the examination of evidence, various recesses for deliberations and, finally, the hearing for oral pleadings (audience de plaidoirie).

Proceedings are issued through a Writ of Summons (Assignation) which is served on the debtor fifteen days before the first procedural hearing. During this hearing, the court sets a time period for the exchange of pleadings and discovery. Decisions rendered do not necessarily have the possibility of immediate execution. In order to be executed, they must first be served on the debtor. They are also subject to appeal.

Enforcement of a legal decision

Unless the court decision is temporarily enforceable, enforcement can only commence if no appeal is lodged within one month and must occur within ten years of notification of the court’s decision. Compulsory enforcement can be requested if the debtor does not comply with the judgment. Obligations to pay can be enforced through attachment (of bank accounts or assets) or through a third party which owes money to the debtor (garnishment).

France has adopted enforcement mechanisms for decisions rendered by other EU member countries. These mechanisms include the Payment Order under the European Enforcement Order. Decisions rendered by non-EU members can be recognised and enforced, provided that the issuing country is party to a bilateral or multilateral agreement with France. In the absence of an agreement, claimants are obliged to use the French exequatur procedure.

Insolvency proceedings

Court-Assisted proceedings

These can be either mandated Ad Hoc or conciliation proceedings. Both are informal, amicable proceedings, where creditors cannot be forced into a restructuring agreement and the company’s management continues to run the business. These negotiations are governed by contractual law throughout their duration. The proceedings are conducted under the supervision of a court-appointed practitioner (a mandataire ad hoc, or a conciliator) in order to help the debtor reach an agreement with its creditors. Both of these types of proceedings are confidential but conciliation can eventually be made public if the debtor has the approval of the commercial court. Nevertheless, the terms and conditions of agreements remain confidential and can only be disclosed to signatory parties.

 

Court-Controlled proceedings

The four types of court-controlled proceedings are judicial reorganisation, judicial liquidation, sauvegarde, and Accelerated Financial Sauvegarde proceedings (AFS).

In all four proceedings, any pre-filed claims are automatically stayed. Creditors must file proof of their claims within two months of publication of the opening judgment, or four months for creditors located outside France. Debts which arise after proceedings commence are given priority over debts incurred beforehand. Certain types of transactions can be set aside by the court, if they were entered into by the debtor during a hardening period (before a judgment opening a judicial reorganisation or a judicial liquidation).

With Court-Controlled proceedings there can be variations in the extent of involvement of the court-appointed conciliator. The sauvegarde and AFS procedures are debtor-in-possession proceedings, but with judicial reorganisation, the court can decide whether to set aside the company’s managers. The role of management is particularly reduced in cases of judicial liquidation, as the debtor company usually ceases to conduct business. Nevertheless, the court can decide for a business to continue operating, under a court-appointed liquidator.

Insolvency trends France
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