French economy: Nantes highlights clouds on horizon

Nantes Nantes, on the banks of the River Loire, is France's sixth biggest city

It is a chilly spring evening in Nantes, western France. Despite the cold, the town is busy. The elegant restaurants and fashionable bars around the opera house are not short of customers.

It is hard to see much evidence here of the downturn in Europe's fortunes.

As the main city in the Pays de la Loire, Nantes has remained prosperous through the slowdown. More than a quarter of its workforce is employed by the public sector and cutbacks have, so far, been modest.

The region has worked hard to develop a diverse economic base. Airbus employs 4,500 workers in a giant complex near the airport.

Nose cones and fuselage parts for the A380 are built and shipped south to the Airbus base in Toulouse, where they are assembled into complete aircraft.

Start Quote

Reforming the university system is absolutely vital to improving the overall quality of higher education”

End Quote Robert Owen Professor of economics, University of Nantes

Shipbuilding is still important in the region, and Nantes has the second highest concentration of workers in computer software industry.

But for all the prosperity there is concern about the future.

Denis Caille is the deputy managing director of the regional development agency. His job is to attract investment to the region.

The agency helped to persuade Airbus to stay in Nantes, by financing a research and development facility for advanced composite materials.

But raising that sort of finance is getting harder. The region wants to raise 40m euros to build two factories for the engineering giant Alstom. It would make Pays De Loire a centre for the production of wind turbines.

"We have many difficulties finding capital," said Mr Caille.

"The banks don't want to give funds because it's a project with many risks."

'A big worry'

Private business is having a similar problem. Francois Ollivaud works for the French Chamber of Commerce and Industry. She has noticed in the last few months that banks have become very reluctant to lend.

Nantes airport Financing for big projects like airports and factories is becoming harder to find

"The problem for our enterprise is to find money to finance projects. The banks have a problem financing themselves.

"It's been a big worry in the last few months."

Without finance, firms will struggle to expand.

That growth is essential if France is to halt rising unemployment, which is now at its highest level since October 1999.

That creates a tough environment for students at the University of Nantes. Nordine Sadoune is 21 and is graduating this year with a degree in economics and business.

"I would like to work in finance, but I'm concerned for the future. I want to spend a year in Australia to improve my English, with English there is a good chance for success."

Credit rating

Some think the French higher education system needs a shake-up to boost the prospects of students like Nordine.

Robert Owen, a professor of economics at the University of Nantes, said: "Reforming the university system is absolutely vital to improving the overall quality of higher education and responding to the longer-term stakes of unemployment and growth in this country.

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If you want to increase taxes you have to decide who will pay and which amount”

End Quote David Martineau French statistics agency INSEE

"There has been no lack of reports pointing the direction for undertaking certain of the necessary reforms in the higher education system.

"The key challenge is to implement concrete and widespread changes, which substantially change the specific educational experiences of students."

Nantes has traditionally been a left-leaning region. There is plenty of support for the French model of high taxation to support government spending on quality public services.

But there is a question over whether France can afford its high level of public spending.

The total annual tax take is already equivalent to 42% of GDP, well above the average of 34% for other industrialised nations.

And in January the nation lost it top-notch credit rating with the agency Standard & Poor's.

David Martineau works for the French statistics agency INSEE. He believes the French deficit is sustainable, but the next government may have to raise taxes if growth does not pick up.

"If you increase taxes - and I think French people are OK with a quite a big increase in taxes - you can recover the sustainability of the system. The other way is to cut the spending, I'm not sure the French people see the problem that way.

"The question is: If you want to increase taxes you have to decide who will pay and which amount."

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