Saturday, November 19, 2011

FRANCE FRANCE FRANCE

Via Charles Blow, Pew had very interesting insights into people's perceptions of their own country. I always felt, without data, that French people had no strong feeling about their frenchness, or that French were less "patriotic"(for lack of a better word) than other countries, say OECD countries. Thanks to Pew, here is a small snippet of data to back this up:
And this makes this graph even more startling:

So this being said, I wanted to have a patriotic moment and put on my French hat for something that has been slightly upsetting me in the past months. A lot of articles have mentioned the widening French/German spreads in bond yields, in parallel mentioning the actual Spanish and Italian yields. This means that in the same paragraph, you hear about a relative value and an absolute value. This has been used as evidence that France is next. There is no denying that the spread has increased
10-Year French/German spread

Now, I haven't seen in any of those articles a way to distinguish whether the widening spread was due to a flight to safety to Germany or an aversion to France risk.  Via MarketBeat, here are the France v. German 10year -bond yield in the last 30 years:
Now, looking at the data, I would actually lean towards the position that France is considered riskier:


German Government Bonds 10 Year
French Government Bonds 10 Year













But I still think that there's an empirical test that has not, and that should, be done so that we can know the whole story.

On a related note, Floyd Norris gives us a nice chart today showing that Germany rebounded quite well from the bottom of the crisis
That's interesting, but here are the Real GDP growth rate quarter to quarter since 2005:
And the quarterly growth rate in German real GDP between 2008Q4 and 2009Q1 was -4% versus -1.5 for France. So yeah, Germany grew quicker afterwards.

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