France is one of the most richly endowed countries of Europe. The favorable climate, extensive areas of rich soil, and long-established tradition of skilled agriculture have created ideal conditions for a thriving farm economy. Large deposits of iron ore, a well-integrated network of power plants, important domestic reserves of natural gas, good transport, and high standards of industrial workmanship have made the French industrial complex one of the most modern in Europe.
After World War II, France enjoyed an economic climate superior to that of the best interwar years. But on the debit side were the extremely high cost of France's colonial campaigns in Indochina and North Africa; the periodic lack of confidence of French investors in the nation's economy, resulting in the largescale flight of funds; and the successive devaluations of the franc.
Through most of the 1960s and early 1970s, the French economy expanded steadily, with GDP more than doubling between 1959 and 1967. However, the international oil crisis of 1974 led to a sharp rise in import costs; the resulting inflation eroded real growth to about 3% annually between 1977 and 1979. Further oil price increases in 1979–80 marked the beginning of a prolonged recession, with high inflation, high unemployment, balance-of-payments deficits, declining private investment, and shortages in foreign exchange reserves. However, GDP grew by an annual average of 2.5% between 1984 and 1991. During the early 1990s, GDP expanded by an average 2%, a modest rate. By the late 1990s, however, the economy began to record higher growth rates. In 1998 the French economy grew by 3.3% in real terms. Unemployment, however, remained high at 11.5%. To combat this, the Socialist-led coalition of Lionel Jospin enacted legislation cutting the work week to 35 hours in 2000. This measure, along with other incentives, resulted in unemployment falling under 10% as over 400,000 new jobs were created in the first half of 2000.
As of 2002, GDP growth was low (1%), due to the global economic slowdown and a decline in investment. However, France's exports increased at a greater rate than imports, fueling the economy. France in 2002 fell from being the world's fourth-largest economy to fifth, being replaced by the United Kingdom. Government debt was projected to rise above 60% of GDP in 2003, and the deficit was forecast to reach 3.5% of GDP, exceeding the 3% of GDP limit set by the EU. France and the United States are the world's top two exporting countries in defense products, agricultural goods, and services. Taxes remain the highest in the G-7 industrialized countries, and the tax structure was seen as a hindrance to business activity. The fastestgrowing sectors of the economy in 2002 were consulting services, meat and milk products, public works, insurance and financial services, and recreation, culture, and sports. Although the government has privatized many large companies, banks, and insurers, it still controls large sectors of the economy, including energy, transportation, and the defense industry. Pension reforms proposed by the government of Jean-Pierre Raffarin in early 2003 were met by huge protests and strikes in France, and the possibility of President Jacques Chirac replacing his prime minister due to the unrest was real.