Notes from Paris – A Tale of Two Cities

October 2, 2014

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I have just returned from a three-week visit to Paris and more generally to France, where I lived for 27 years, the major part of my professional life.


The problems confronting France today constitute a depressing combination of economic, political, social and security concerns.

The French economy is the second largest economy in the Eurozone and the fifth largest in the world, following the US, Japan, China and Germany. Thus French economic developments have importance beyond that country. The French economy is lagging the weak recovery in the Eurozone and stagnated in the first half of this year. Leading indicators suggest this stagnation continued through September, with both manufacturing and services production still contracting. The difficult political situation and uncertainty about future policies discussed below is depressing the business climate, despite a certain improvement in the dialogue between business and government. Business investment is likely to be negative for the current year. The unemployment rate remains stubbornly high, above 10 percent, with 22.5 percent of young workers now jobless.

Having failed thus far to carry out needed economic reforms, France continues to lose competitiveness. Net trade will make a negative contribution to the economy this year. Next year will not be much better, despite the boost from a weaker euro, as labour costs rise relative to those in other Eurozone countries. All efforts to carry out market-oriented reforms encounter stiff resistance, very often leading to strikes.


The current political climate affords little basis for optimism. President Hollande’s popularity is down to the low 20s, the lowest for any postwar French president. […]

In elections last Sunday the center-right parties gained control of the Senate. While that body is not nearly as powerful as the US Senate is, it will be able to make Hollande’s quest to achieve his reform agenda even more difficult. A more disturbing result in the vote last Sunday was the success of Marine Le Pen’s National Front party, which for the first time gained two seats in the Senate. This follows the National Front’s recent successes at the European and local levels. While Marine Le Pen has sought to make her father’s party somewhat more respectable, its anti-Semitic and anti-immigrant roots have not disappeared.

The increased support for the National Front happens at a time when there has been a sharp increase in anti-Semitic incidents in France. These appear to have been related to the recent conflict in Gaza. I understand that, despite the increased dangers in Israel, the number of French citizens emigrating from France to Israel is at a record level this year. Part of my time in Paris I stayed in an area with large Muslim and Jewish communities living in close proximity. On the surface, life there seemed peaceful. Across the street there was a Muslim butcher shop next to a kosher food market. However, I was told there have been incidents, including attacks of sufficient severity that many Jewish residents feel unsafe for the first time and would like to move, preferably to the US or Israel. This is one of the developments in Paris and France that has worsened in the nine years since I left, and it is indeed sad.


A week and a half ago France awoke to find that the newspapers and TV news all had the same picture, that of Herve Gourdel, a French mountain guide who was brutally murdered (his beheading captured in a four-minute film) by jihadists in Algeria. There was universal shock, as there had been in the US and Britain in similar recent cases. I think the French were very surprised at how quickly after Gourdel’s capture the killing was carried out. They had anticipated a period of negotiation and possible action to liberate the man.

The barbaric execution, as the French referred to it, strengthened French determination to strike ISIL in Iraq, and a decision to join the US and Arab states in hitting them in Syria is likely. There is considerable pride evident in this action. A positive development last Friday and over the weekend was the reaction of the Muslim community, led by Muslim religious and political leaders. In Paris and other cities there were demonstrations of support for France and a strong rejection of ISIL by France’s Muslims, who were joined by religious leaders of all the major faiths. Typical among the statements issued was this one (rough translation): “France is our republican family. We, the Muslims of France, are all Herve Gourdel. He is living among us. One cannot support the mentally ill people who defile our religion.” It was encouraging and moving to see the French standing together to confront this challenge.



The ideas and opinions expressed in this blog are those of the author, and they should not be perceived as investment advice or as any other kind of advice.

The preceding is an abridged commentary by Cumberland Advisors and has been reposted with permission. Cumberland Advisors commentaries are available at

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