Coface Group
France

France

Population 64.8 Million
GDP per capita 41,897 $US
A3
Country risk assessment
A1
Business Climate
Change country
Compare countries
You've already selected this country.
0 country selected
Clear all
Add a country
Add a country
Add a country
Add a country
Compare

Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 1.8 1.5 -8.0 5.4
Inflation (yearly average, %) 2.1 1.3 0.5 1.6
Budget balance (% GDP) -2.3 -3.0 -9.2 -9.6
Current account balance (% GDP) -0.9 -0.8 -1.9 -1.4
Public debt (% GDP) 98.1 98.1 115.7 117.9

 

(e): Estimate (f): Forecast

STRENGTHS

  • Qualité des infrastructures et des services publics
  • Main-d'œuvre qualifiée et productive, démographie dynamique
  • Puissance touristique
  • Groupes internationaux compétitifs (aérospatiale, énergie, environnement, produits pharmaceutiques, produits de luxe, industrie alimentaire, commerce de détail)
  • Puissance agricole mondiale
  • Niveau d'épargne élevé

WEAKNESSES

  • Insufficient number of exporting companies, loss of competitiveness and market share
  • Weakening of the product range, insufficient innovation efforts
  • Low employment rate of young people and senior citizens
  • Room for improving the efficiency of public spending
  • High public debt
  • Growing private debt

Risk assessment

Towards an acceleration of the recovery in the second half of the year?

The French economy will experience a strong recovery in 2021, after having gone through an economic crisis of unprecedented proportions in 2020. The confinement of the population and the closure of so-called "non-essential" businesses had been decreed twice in 2020 and again in April 2021 to curb the pandemic, before being gradually lifted in May and June. The easing of the restrictions then allowed for a rapid recovery in activity. The continuation of this recovery in the second half of the year will depend on the consequences of the fourth wave of the pandemic, which should, however, be less penalizing for economic activity, due to the rapid vaccination of the population (67% of the population had received at least one dose in August 2021, 53% were fully vaccinated). Household consumption, which had fallen in 2020, is the main driver of this rebound. As their purchasing power was preserved during the crisis, thanks to the partial activity scheme (which also made it possible to limit the rise in unemployment), households have built up substantial savings, which they should largely spend, provided that the health situation does not get out of hand. The evolution of the latter also conditions investment by businesses, which continue to benefit from the support measures put in place at the start of the crisis, such as the postponement (or even cancellation for certain sectors) of the payment of social security contributions, the solidarity fund and state-guaranteed loans (EUR 135 billion accumulated to June 2021). The government is also supporting activity via a EUR 100 billion (4% of GDP) recovery plan, two thirds of which should be committed by the end of 2021. The rebound of the economy is therefore based on domestic activity, as the external situation remains adverse. Aeronautics, the leading export sector (9% of the flow of goods and services), remains very much affected by the air transport crisis, despite a rebound in the second quarter of 2021 (sales up by 24% compared to Q1 2021, but 37% lower than Q1 2020). Tourism (8% of exports) remained hampered at the beginning of the year by traffic restrictions: overnight stays fell by 48% in Q1 2021 (-70% for non-residents). Although the reopening of borders should allow an influx of European tourists, the sector will remain hampered by health uncertainty, the maintenance of certain constraints (introduction of the health pass for leisure activities) and restrictions on intercontinental travel. After falling by 38% in 2020, insolvencies have remained on the same trend in the first half of 2021 (-48% compared with H1 2019), thanks to the support measures. Although 22,500 businesses are on probation and could go into default when these measures are withdrawn, this will be gradual, thus postponing the rebound in insolvencies until 2022.

 

The reduction of the public deficit will wait and the recovery plan will take precedence

The public deficit will remain very high in 2021 after having increased significantly in the face of the economic crisis. As the bulk of the support measures have been extended several times for the sectors most affected, public spending has been constantly revised upwards during the year (an additional EUR 20 billion will be released in May 2021). The public debt therefore remains very high and its sustainability will be one of the main challenges after the health crisis.

After a sharp increase in 2020, the current account deficit should narrow somewhat in 2021, thanks to a slightly stronger rebound in exports than in imports. Key export sectors, such as cosmetics, leather goods and wines and spirits, experienced a solid recovery in the first half of 2021, driven by the Chinese and American markets. Higher tourism receipts in the second half of the year should increase the surplus in services. The current account deficit will continue to be financed by debt or equity issues by non-residents.

 

Presidential campaign 2022: who to prevent the announced duel?

In power since 2017, President Macron, from the centre-liberal party La République En Marche (LaREM), has a comfortable majority in the National Assembly (349 seats out of 577), thanks to the support of the centrists of Modem and Agir. While the regional elections in June 2021 gave the traditional parties the upper hand - with the Republicans (LR, right) and the Socialist Party winning all regions, except Corsica and Martinique, which went back to regionalist candidates - they mainly benefited incumbents, who were all re-elected. Thus, in July 2021, the Rassemblement National (far-right) and LaREM, which did not win a single region in this election, remained at the top of all polls for the April 2022 presidential election, with each between 22% and 28% of voting intentions in the first round. Nevertheless, this expected duel could be challenged by the nomination of the LR candidate, third party in the polls. In August 2021, the question of the organisation of a primary - in which regional presidents Laurent Wauquiez and Valérie Pécresse would agree to participate, but not Xavier Bertrand - was still pending. On the other side of the political spectrum, while the ecologist party EELV has planned to organise a primary in mid-September 2021, Jean-Luc Mélenchon has already announced that he will be the candidate of La France Insoumise (extreme left). If, with less than a year to go before the election, President Macron is the favourite to be re-elected, this will largely depend on his management of the health crisis between now and then.

 

Last updated: August 2021

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 15 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 they remain important in terms of total value. 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 January 1 and for the second half year in question, the rate applicable is that in force on July 1.

 

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 15 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

French insolvency law provides for six procedures to undertake restructuring or avoid insolvency. These are either assisted proceedings or proceedings controlled by the court.

 

Assisted proceedings

These can be either mandated ad hoc or via 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
Top
  • English
  • Français