In France, it is very difficult to spend money you do not have If I had to use one word to describe France's financial system, the word I would choose would be "cautious". French banks are immensely careful about whom they lend money to and, to limit risks, they spread their investments much more widely than those in the US or UK. Only about a quarter of banking activity is related to investment banking and dealer-broker activity - the rest is all to do with retail banking. This meant when the credit crunch bit, the French banks were hit a lot less hard than those in many other countries. But it is not just about banking investments - this country as a whole simply takes far fewer risks. (...) "In the US and the UK, the economy has been driven by household spending, consumption has been driven by credit, and a lot less in France, so that's why when there were periods of expansion France grew a lot more slowly than the UK and the US but conversely when it's slowing down, it will slow down in a more moderate fashion than the UK or the US." France's rate of growth is horribly sluggish - this year it looks set to hover around just 1%, meaning its likely to be way off target for meeting its promise to the EU to bring its budget deficit back under control by 2012. (...) "Expect two conditions - a down payment of 20% of the value of the house plus mortgage [repayments] which will not exceed 30% of income. "You already have a pretty good safety net there and clearly no real estate financing similar to the sub-prime market that has existed in the US and which has hurt the financial system so much," Ms Lagarde says. (...) "I think we have let this world of fantasy and virtuality overcome reality... There have to be more principles, more discipline and a bit more reality," the minister says.
If I had to use one word to describe France's financial system, the word I would choose would be "cautious".
French banks are immensely careful about whom they lend money to and, to limit risks, they spread their investments much more widely than those in the US or UK.
Only about a quarter of banking activity is related to investment banking and dealer-broker activity - the rest is all to do with retail banking.
This meant when the credit crunch bit, the French banks were hit a lot less hard than those in many other countries.
But it is not just about banking investments - this country as a whole simply takes far fewer risks.
(...)
"In the US and the UK, the economy has been driven by household spending, consumption has been driven by credit, and a lot less in France, so that's why when there were periods of expansion France grew a lot more slowly than the UK and the US but conversely when it's slowing down, it will slow down in a more moderate fashion than the UK or the US."
France's rate of growth is horribly sluggish - this year it looks set to hover around just 1%, meaning its likely to be way off target for meeting its promise to the EU to bring its budget deficit back under control by 2012.
"Expect two conditions - a down payment of 20% of the value of the house plus mortgage [repayments] which will not exceed 30% of income.
"You already have a pretty good safety net there and clearly no real estate financing similar to the sub-prime market that has existed in the US and which has hurt the financial system so much," Ms Lagarde says.
"I think we have let this world of fantasy and virtuality overcome reality... There have to be more principles, more discipline and a bit more reality," the minister says.
Apart from the [barf] quote about sluggish growth, you can see the beginnings of an acknowledgement that debt-fuelled 'growth' is not real. In the long run, we're all dead. John Maynard Keynes
Of course, it makes for less froth on the surface aka "non-sluggish" GDP growth. When locusts move on, they leave nothing behind
