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Why the French far-right is wrong and the country should stick to the euro

Aurelien Morissard | IP3 | Getty Images

France's far-right leader Marine Le Pen appears to be on course to win the first round of the upcoming presidential election.

Though she is unlikely to win the mandate to become the next French president in the second round of voting, it is worth noting there is increasing support for the anti-euro and anti-European party.

One of Le Pen's campaign pledges is putting the country's membership of the euro zone to a referendum, arguing that the common currency hasn't benefited the French people.

Analysts have told CNBC that such an argument is nonsense and that in fact, the second-largest euro zone economy has been one the main beneficiaries of the single currency.

"Interest rates were much higher pre-euro," Gilles Moec, chief European economist at Bank of America Merrill Lynch, told CNBC over the phone on Friday. "It's thus hard to argue France has been a victim of the monetary union," he said.

"In fact, France has been one of the main beneficiaries of the lower rates," he added.

The euro was introduced on January 1, 1999, with the European Central Bank taking control of monetary policy. As a result, the euro has removed most of the politics from currency markets in Europe and has boosted trade.

Vincent Juvyns, global market strategist at JPMorgan Asset Management, told CNBC that he doesn't see any ground to blame the euro for the subdued economic growth in France.

"The economy is picking up at the moment," he noted, adding that French companies have seen exports rise because of the single currency.

According to data released by the European Commission, France is set to grow 1.4 percent this year, 0.2 percentage points higher than in 2016. The country has struggled to expand its economy, while reducing its government spending. In fact, France's deficit is set to increase from this year to the next, from 2.9 percent of gross domestic product to 3.1 percent in 2018 – above the EU's threshold.

However, according to Juvyns from JP Morgan, the solution to boost the French economy is not returning to the franc as Le Pen supports.

"I don't think this is a very good economic plan," he said, commenting on Le Pen's plan to convert the 1.7 trillion euros ($1.81 trillion) into francs.

Looking at the main economic indicators pre and post euro membership, it is clear that exports rose since the country began using the euro and the economy has grown at a faster pace, despite a higher deficit and a stagnation in unemployment.




Unemployment (percentage of active population)




Exports (in million)

To the EU = 199,767
Extra EU = 105,662

To the EU = 240, 248

Extra EU = 122,960

To the EU = 268,205

Extra EU = 187,785

GDP (million euros)




Deficit (million)




Data from the Eurostat

Furthermore, some analysts believe that France has potential to grow further.

"France's demographics are a comparative advantage over other EU countries," Bank of America Merrill Lynch said in a note last month.

"France can still benefit from 0.1-0.2 percent natural growth per year on average over 2018-25, while Germany's natural growth will turn negative to 0.4 percent absent further immigration acceleration," the bank added.

The same research noted also that each hour worked in France creates 52.4 euros of real gross domestic product, above the 47.9 euros registered in Germany.

"What's missing is stronger total factor productivity," the bank said, calling for labor market reforms.

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