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France Weathering Credit Crisis Better: Pourquoi?

Thrifty household spending in France means the economy grows more slowly, but it also means that it slows down more moderately, too. In France, it's nearly impossible to spend money you don't have.

French credit cards are essentially debit cards, so there's no need to cut them up when you want that new Chanel bag, and banks aren't keen on providing a home loan unless you have 20 percent down, and the mortgage payments make up no more than 30 percent of your income. As a result many French homeowners buy their first property at a later age; and compared to the UK, where 70 percent own property, 57 percent of the French own a piece of earth. As you can imagine, this also means France has not seen a subprime housing meltdown.

While the French indulge in good wine, food, and sinful cigarettes, at least they don't treat themselves to hefty credit card debt and unrealistic mortgages. Do you think Americans and Brits should borrow some of the French economic je ne sais quoi, or is the extreme slowdown worth past and future growth?


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gabiushka gabiushka 8 years
Thanks Cotedazur, I come from a very similar education system.
cotedazur cotedazur 8 years
Sorry, the housing PROBLEM, not housing probably. oops!
cotedazur cotedazur 8 years
I live in France, so obviously I'm a bit biased: I think that the lack of credit in this society is incredibly wise and wish the US would follow suit. Snowbunny, the main difference here is that school is virtually free - even to go to the Sorbonne, for example, tuition is between 300 and 400 euros per year. (That's about 550 dollars, if you don't watch the exchange rate as obsessively as I do.) Universities are public and cost very little. There are drawbacks, though. The fact that obtaining credit is so difficult means that big purchases like houses are out of many people's range. We happen to live in an area where housing prices are through the roof (you absolutely can't find a free-standing home, even a small one, for less than 400,000 euros). Some of my husband's co-workers earn as much as 200,000 euros gross, but the banks here won't give them more than 300,000 euros - meaning that owning a house is impossible. They are healthy, mid-30's men who work their asses off as doctors, and they will probably never in their lifetimes become homeowners. Despite that, though, I think that France has a better system. The housing probably is really limited to the most expensive areas of France- basically Paris and the south - and elsewhere they'd have no problem finding a less expensive property. The lack of credit, in general, is much safer. When my husband and I want to buy plane tickets, we put some money aside for a few months and buy them AFTER we have enough saved -- instead of buying, then paying later. And this may be unrelated, but I have a savings account that earns 5% interest and is untaxed. Good luck finding that in the US.
Cassandra57 Cassandra57 8 years
We absolutely need to get away from our attitude of entitlement: "It's shiny and pretty, I want it." Last I heard, credit cards are still necessary for a few things, like booking flights and renting cars. (Not that I can afford to travel, but I may need a day rental while my car is in for maintenance.) They're a convenience for recurring payments, like cellphones or newspaper subscriptions.
snowbunny11 snowbunny11 8 years
I totally agree with this also, but...Tiabia is so right about education. I got a scholarship for undergrad, and worked 20-30 hours throughout. But now that I'm in law school there would be no way to pay for it if I didn't take out huge loans! I moved back home and am going to my state school, AND I got a scholarship, and I still will spend about $25k a year for 3 years to go to school! If I waited to save up that much money, working at a $30k a year job after college, it would take me forever, and my lifetime earnings would be significantly lower since I would be starting the higher income job much later in life. I don't know whether the solution is to cap tuition for at least state schools for students, or to allow us to take out these massive loans and pay them back. The one really nice thing the govt. has done lately has passed a bill that will forgive your loans after 10 years of public service, and allow you to pay lower payments in the meantime. I really want to be a prosecutor, but their salaries are so low $40k, that it would make it impossible to do with $75k in debt before this program. Students graduating and going on to big law firms who will make $90k+ should be able to pay off their loans. I am curious about what France does for education..
rabidmoon rabidmoon 8 years
When I was married, I had the whole credit thing in the UK when we had our house - which needed renovation, and subsequently loans for new kitchens, and credit cards going gangbusters - even with us doing most of the work. Though we made a good profit, even taking into account what we spent - I never want to feel so nail-bitingly in debt ever again, and I had shouldered 90% of the costs to boot. When I moved to Finland I decided I was done ever using credit again, and now the only debt I ever plan to have is if I perhaps buy another property. Otherwise - no way. As a friend's "country mamma" friend once said years ago (and by "country mamma" I mean when this woman made chicken soup she LITERALLY went out and killed the chicken first): "If you don't have the cash to buy it in that moment, you can't afford it." It means waiting sometimes for things, but its really good piece of mind to know that everything in this flat is 100% bought and paid for, and that I have no bills except rent and a very cheap electric bill. :P
janneth janneth 8 years
I think that students should pay for part of their education, so some college loans are ok with me. But credit card debt is absurd. For what? Expensive shoes? Designer clothes? Restaurants? That is what I see happening for some people.
stephley stephley 8 years
Tiabia, you're right about school - it's just been a while for me on that :) I used grants, worked and went part-time forever, and that's NOT how I want my daughter to do it, and I don't want her to struggle through her 20s with student loans.
ilanac13 ilanac13 8 years
honestly - i think that what they are doing in France is something that we should consider for the future. i know that we think that if you're not able to get the help from banks that you need then it's going to hinder our economy but in the long run you have less personal debt. think about how the mortgage thing would be soo different now if we had that system here. people woudln't have bought houses that they really can't afford and then there wouldn't be nearly as many people defaulting on loans and the such. i think that it's a learning experience that we should consider since our way of doing things obviously isn't the best.
geebers geebers 8 years
I have two credit cards and pay them in full every month. In fact, I have never not paid off the full balance (except on my one 0% interest card) but I also know not to spend unless I know i can pay it off. Many people have a hard time with that and for them I strongly advise debit cards. My cards also both give me cash back.
tiabia tiabia 8 years
While it is easier to find a car that can be bought with cash...finding a house like that isn't so easy. And what about education...for the majority of Americans, funding ones post high school education is an automatic do you avoid that one? That's practically a pre-ordained debt.
mondaymoos mondaymoos 8 years
I live on my debit card, so this wouldn't be a big change for me. I do make payments on my car, but they've never been late so *shrug*
gabiushka gabiushka 8 years
Some of the people may know it Organic, but fewer of them even bothered to think that there is no such thing as 'free money'. And why are we looking to France as an example being that it used to be that way in the US in older times? And if we want to put more examples let's look at South American countries that have put their people through hunger and economic crisis but are now debt free and moving forward. Personally I don't think you need debt at all. If you want examples of European countries (which people here tend to look up to) take Italy and at least in their small towns you will see houses that are built bigger as families get bigger and save money to make them larger. And cars, well, what is so wrong with a car you can pay cash for? Honestly I just laugh at people that look at these examples of frugality,now that the situation calls for it, and amaze themselves. Like it is a new kind of cool...
hope2be hope2be 8 years
Credit industry is the next in line to fall (if they've not fallen already) after housing market. They'll need as much if not more bail out. That's why I completely go against this bail out, once it's approved, it set a precedent for things to come (I know this is not the first bailout, but it's so far the most money). I live on my debit card and/or cash. We actually really owned everything we've bought (car, tv, furniture, etc). We saved for things we want and only buy them by cash. No credit card for me (and fiancee). I don't believe in it, and the most money in my lifetime that I'll owe is my future mortgage payment IF I'll ever buy a house in my lifetime :lol:
MartiniLush MartiniLush 8 years
I do use a credit card, but pay it in full every month. Other than my house, I have no debt. The credit card I use gives me vacation points, so every year, I get a free vacation! :-) But, I have to be really disciplined to watch my spending so I can pay it in full each month! I "pretend" it's a debit card in my mind! ;-)
organicsugr organicsugr 8 years
What are you people talking about? Blaming the credit bubble caused by below-market credit rates made up by the Fed? I don't think anyone thinks that is the problem.
Roarman Roarman 8 years
I agree that we could take our cue from the French. It's simple really, live within your means.
Jude-C Jude-C 8 years
I also live only with debit card. It just works a lot better that way. There's no need for people to live so far beyond their means--that's exactly what leads to problems such as the one we're having. The American credit system and companies have made it seem normal and correct to live way beyond one's means.
CaterpillarGirl CaterpillarGirl 8 years
I agree with stephley and will now pick my jaw off the floor.
sexylibrarian sexylibrarian 8 years
Good one tiabia :rotfl:
tiabia tiabia 8 years
...or educational loans!!!
sexylibrarian sexylibrarian 8 years
I think Americans can learn alot from the French. Everything is a little better with a little red wine.
stephley stephley 8 years
I much prefer the French way - I've been living with just a debit card for years. Debt should be kept to important things, like a car or house.
tiabia tiabia 8 years
The American Credit system is absolutely horrendous. While I clearly understand the idea of awarding those that are responsible with their credit (paying on time, and the likes), there needs to be a new system of "punishing" those less responsible. Lower credit score = higher payments...SAY WHAT!!! As for adopting anything French...can we adopt the guillotine for just a few moments. I know several Wall Street heads that I would just love to see ROLL!!!! :evil:
hypnoticmix hypnoticmix 8 years
Hey well every credit expert I've seen on news shows says cut up your credit cards and keep only one, so maybe the French are on to something. Credit cards are like the financial version of cigarettes.
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