What's going on?
On Monday, France’s central bank cut its forecast for economic growth this quarter, blaming the ongoing wave of riots sweeping the country (tweet this).
What does this mean?
The “gilets jaunes” (a.k.a. yellow vests) started out protesting a proposed “green” tax on fuel (hastily dropped), but quickly morphed into a more general anti-government movement. Rioting in French cities over the past few weeks – particularly in Paris – has seen vandalism, looting, and violence put off shoppers, tourists, and investors. It’s not quite la vie en rose…
The protests have already cost retailers around $1 billion of pre-Christmas sales, and some predict that small and medium-sized businesses will end up losing over $11 billion. The “economic catastrophe” has led to the French central bank forecasting only 0.2% growth in the country’s economy this quarter compared with the one before – just half the 0.4% predicted previously.
Why should I care?
For you personally: Real-world economics.
“The economy” can seem a somewhat intangible concept – when people talk about the effects of imports, exports, and industrial goods orders, it can be hard to picture exactly what’s making things tick. But that’s not the case here: current (and very tangible) events, even those confined to a few weeks, are having a big impact. And there are mounting concerns that the yellow vests could bring France’s economy to a complete standstill, not to mention force political changes.
For markets: Anarchy in the UK?
Across the English Channel, the UK is in the midst of finalizing its divorce from Europe. It’s a long, drawn out-process: a parliamentary vote on the terms of departure was supposed to take place on Tuesday before being delayed. What happens here will have major ramifications for the values of the pound and the euro, as well as British and European stocks. In fact, the result of the (eventual) vote will probably have an even bigger impact on markets than either France’s catastrophic economy or the UK’s growth slowdown in the three months to October.