Funds That Can Win in a Resurgent France

Investors watching the Tour de France cyclists gliding down the Champs-Elysees to the finish line at the Arc de Triomphe on July 29 might want to ask themselves if that country might be worth a look for an investment allocation, too.

After all, in May, France elected its first pro-business president in recent memory, followed a month later by a victory in parliamentary elections for Nicolas Sarkozy's center-right UMP Party.

President Sarkozy has been talking about economic concepts unheard of in modern France: lowering the tax burden on businesses; ending the 35-hour workweek; and reducing the size of government. Et après!

Room for Growth

One possible reason for considering channeling some investments in France's direction is that there is enormous room for improvement in the nation's economy. One could argue that it is so bad that even mild success by the new administration might produce impressive investment results. The bar for success is quite low. For example, while unemployment in the European Union dropped to 7.0% in May, France's jobless rate stood at 8.7%, the highest rate of the group.

In export-minded Europe, France's ability to sell more goods abroad than it imports has been badly lagging. The nation suffered a trade deficit amounting to 1.7% of gross domestic product in 2006. And while government spending as a percentage of GDP declined for the euro zone as a whole to 46.2% in 2006 from 48.2% in 2002, France's swelled over the same period to 53.8% from 52.6%.