The French debt is more than that of the United States in terms of percentage of GDP. The same institutions , which are used to fund failing economies in Europe are being showcased to have reason for fear that France may cause Europe to topple under its own debt weight.
France's triple A rating is used to keep the European Financial Stability Facility afloat so that other economies within Europe can be bailed out with this largesse.
Now if the basic largesse provider turns debtor and defaulter then the fund that lends a helping hand may wither away and dry out even you can say Greek salad.
Wellm in that case, we may be saddled with a crisis owing to the very mechanisms that were used to create Europe as a single economy. Some time ago, when the United Kingdom stuck to its guns and refused to have the Euro as its currency, trade pundits decried the move.
They said that UK should have put is fate with the rest of Europe and should have grown with them.
Now with the crisis of Greece, Portugal and now France it seems they were the smartest of the lot. Today, if Greece could have devalued its currency , it may have averted the crisis without a bailout package from France.
However, it is only the UK which can do that now without any hindrance to its economy.
The Indian economy is already affected with exports being squeezed with the European economy failing with lack of local demand.
Well, just as USA's problems began with shifting its factories to cheaper lands; so did Europe's problems begin with subsidizing everything .
In Germany, trade unions carry out negotiations with the government to work three days a week and get paid the same salary.
This is done to accomodate more workers in the same factory with no loss in pay but no increment either.
This socialist model is good for the short term interests but murder for the long term as the economy ignores inefficiency and does not encourage efficiency at any level.
A liberal free market economy rewards customer friendly and popular economic activity with a premium and then punishes wasteful schemes, which are unpopular with the buying and paying public with economic failure.
The United States and the Asian countries had long followed this logic in the market and have survived till now.
Europe and Japan had chosen to gloss over any wrinkles and sweep them under the carpet.
Europe did this with manufacturing and services while Japan did this with its banking industry. The result is for all to see. Right now, the banks in the United States have domain knowledge but they cannot back up an industry which has long been shifted to Mexico, Phillipines, India, Malaysia, Thailand and China. Today Europe has subsidized a loss too many.