Attractiveness: Europe leads the dance, France goes beyond Germany

France goes beyond Germany, and Europe does better than China. The latest report on the international attractiveness of the consulting firm EY (formerly Ernst & Young), published Tuesday, June 4, shakes up the image of an Old World Epinal lagging behind the rest of the world economically.

Western Europe is indeed the geographical area that attracts the most investors with 54% of them who place this region on the highest step of the podium, in front of Eastern Europe and America North. China ranks fourth in this ranking, based on a survey of hundreds of business leaders and investors.

Europe: "stable giant"

In the Brexit era and the unflattering comparisons between growth rates in Europe and other regions, this enthusiasm of investors may be surprising. "We must not forget that it is the world's largest economic region, with some 500 million consumers, an important high-tech industry and a real diversity of situations between very advanced and expensive countries, and others that are less developed. but with great potential, "summarizes Marc Lhermitte, partner EY and author of the barometer of attractiveness for France.

He also points out that if investors can be enthusiastic about the "dynamism" of Silicon Valley in the United States, for the "potential" Chinese, they are just as fond, if not more, of "certainties" in Europe. The Old Continent still appears as an island of stability in an ocean of uncertainties, be it those related to the economic slowdown in China or the Sino-US trade stalemate. Investors are attracted by this gigantic set of countries "which managed to organize a regional economy where growth rates are certainly less strong than elsewhere, but remain stable," says Marc Lhermitte.

But this cohesion, which is the strength of the Europeans for investors, is put to the test. The uncertainties related to Brexit and the threat of a retreat embodied by the populists who have the electoral wind on the rise could scratch the good image of Europe.

France "nerve center for innovation"

For now, one of the big winners in Europe this year is France, in the eyes of investors. France has risen from third to second position in the most attractive territories, just behind Great Britain and ahead of Germany. This is the first time since 2010, that Paris ahead of Berlin in the traditional barometer of the attractiveness of EY.

France is even the European country that hosted, in 2018, the most projects (investments, sites) in research and development and industry which makes it "the nerve center for innovation", stresses EY French analyst in his study of the French case.

France is moving forward. We will continue our efforts to attract more and more investment in our country. This is the spirit of #ChooseFrance. pic.twitter.com/CEZDXkqTyE

French President Emmanuel Macron was therefore right to bombard Twitter messages welcoming the good performance of France. But he is not the only one responsible. First, Germany has lost some of its luster: "In the eyes of investors, Germany is more vulnerable than other European countries by Brexit and the trade dispute between China and the United States, because 'it is a economy firmly focused on exports,' notes Marc Lhermitte. In addition, Germany trailed another bullet for business leaders: full employment in some regions ... "If this is clearly an indicator that everyone in Europe wants to Germany, it also makes it more difficult hiring, which can slow down business start-up projects, "says the author of the study.

Then, France did not exceed its neighbor in Germany with a magic wand "macroniste". She is grappling good points slowly but surely for several years already. After the debt crisis in Europe, Paris realized that the country suffered from a lack of competitiveness and image. "By successive keys, reforms and developments, France has climbed this slope," said Marc Lhermitte. EY notes that the introduction by the former French President François Hollande of the CICE (competitiveness tax credit for employment, which benefited start-ups a lot) in 2016 marked a turning point for foreign investors.

Attractiveness for whom?

But we must also give Macron what belongs to Macron, believes Marc Lhermitte. "In a difficult budgetary context, he renewed the CICE and quickly carried out reforms, such as the reduction of corporate taxation and the reform of labor law that accelerated the improvement of the image of France among investors ", Says this specialist. His stance as president of the "start-up nation" also contributed to the good French performance, according to the report. It may be mainly about appearance, but France, with its political system "is very embodied, very personalized and the image conveyed by the president plays with investors," says Marc Lhermitte.

However, France must not rest on its laurels, according to the famous consulting firm. "Unemployment is still the main black spot in France, and we must also continue to reform the tax system to gain competitiveness," said this specialist in economic attractiveness for which it could allow Paris to take the place of London while top of the charts.

But for some economists, this goal is not necessarily desirable. "The recipe proposed by EY is similar to the reforms carried out in Germany in 2010, which, admittedly, allowed the country to grow, but are now highly criticized for having strongly increased inequalities and increased insecurity with 'small jobs'" recalls Pascal de Lima, Chief Economist at Harwell Management Consulting.

For him, too much to look at the barometer of attractiveness, we forget that in France too, indicators of inequality are progressing. "This attractiveness must benefit everyone and not only those who win and attend VivaTech [French innovation show, Ed]," he says. However, he does not think it is necessary to sully such indicators, but perhaps to seek to improve them by adding other criteria, such as the progress of technological investments in territories forgotten by the "start-up nation" or the jobs created by SMEs (small and medium-sized enterprises). We would see if France would continue to enjoy the same good image with investors.