SPENDING DIFFERENCES BETWEEN FRENCH AND GERMAN CORPORATES

German corporates have saved significantly more than French corporates since the financial crisis. As we have shown in a recent report, this mostly reflects a higher profitability of German corporate in the past. It is therefore not surprising that German corporates have seen their leverage decline, while leverage for French companies has been trending upwards. It would be wrong, however, to conclude that the financial vulnerability of French companies has also gone up. In fact, French companies have built up significantly their cash buffers over the last years in the face of rising economic uncertainty and in order to finance M&A activity. Furthermore, country specific factors also play a role in explaining differences in spending patterns. One crucial factor, for example, is differences in the pension system. Corporate pension schemes in Germany play a much bigger role than this is the case in France. Consequently, German corporates are more affected by the low interest rate environment that makes additional savings necessary to cope with pension liabilities. At the same time, we have seen much higher M&A activity among French companies.