Drastic political instability in France has already sent ripples across the nation’s economy and continues to threaten the stability of the European Union. Previously France, alongside Germany, made up nearly half of the eurozone economy. 

Why it matters: With both nations crumbling under internal political strife, the so-called French-German axis that previously powered the EU’s economy has turned into a vacuum. 

In early December, French lawmakers on both sides of the aisle joined together in a no-confidence vote that ousted Prime Minister Michel Barnier and his cabinet members. The vote, prompted by disagreements over the national budget, is the first vote of its kind since 1962. The move comes as the National Assembly, France’s lower house of parliament has weakened as no one party holds the majority. 

The left-wing New Popular Front and far-right National Rally united in opposition to Barnier’s budget, with the centrist bloc lacking the power to prevent the destabilizing move. As many wait for President Emmanuel Macron to appoint a successor, the new head of government will not have a majority and per the French constitution there cannot be an election until at least June. 

“It’s highly unlikely they’re going to get a political equilibrium that has a mandate to implement a credible fiscal course correction,” Mujtaba Rahman, managing director of the Europe at Eurasia Group told AP News. “And that’s obviously a problem for Europe because it means the great potential of the European economy is not what it otherwise should be, because you don’t have France and Germany firing on all cylinders.”

Economists say France and Germany’s political turmoil could lead to a shift in the power balance within the EU, as their economic weakness considering other countries’ stability could impact how the EU stands. 

“This could either weaken Europe’s position globally or shift power and influence on other European countries like the Netherlands or Spain, which are performing well at the moment,” said Anne-Laure Delatte, a French economist and head of research at the National Center for Scientific Research to AP News.

What Survey respondents are saying: For credit professionals managing French accounts, most sales to France are to established customers, with 92% of respondents to the Credit and Collections survey reporting that sales in France were primarily to existing customers. Largely French customers are offered 31-60-day terms, representing 50% of respondents. Additionally, 36% of respondents offer 1-30-day terms, 7% offer 61-90-day terms and 7% do not extend credit to customers in France. 

On average, customers in France are 13 days beyond terms, with 54% of respondents saying that delays are consistent and 16% saying they are increasing. Delays are attributed largely to a customer’s payment policy, with 56% of customers saying that policies that dictate they only pay on a set day of the month cause delays. Additionally, 11% of respondents attribute delays to billing disputes and cash flow issues respectively.

“Extend credit to sale of equipment, withhold credit when it comes to service,” one respondent wrote. “Agree with the customer that payment be made in stages-50/30/20, rather than risking the exposure to be paid entirely at the end.”

“With continued global inflation, war in France and high interest, you need to know your true legal customer to prevent fraud and keep your A/R secured,” another respondent wrote. 

The bottom line: Knowing your customer remains vital even when maintaining international accounts. In light of the political and economic uneasiness in France, it is more important than ever before to carefully manage those customers.