French businesses are grappling with heightened uncertainty, according to the latest economic survey from the Bank of France, which reported a slight uptick in activity for November. The findings highlight the challenges facing Europe’s second-largest economy amid a political crisis and ongoing economic pressures.

The survey, conducted before the recent collapse of Michel Barnier’s government, revealed significant unease across sectors. Business uncertainty in the industrial and construction sectors reached levels not seen since the energy crisis of 2022. The political turmoil, triggered by a no-confidence vote, has left France without a functioning government or a valid budget for 2025. President Emmanuel Macron is now tasked with appointing a new Prime Minister to form a government and address the political vacuum.

The Bank of France’s report noted that uncertainty remains “relatively high in all sectors,” with companies citing the domestic political situation, tax debates, and global economic conditions as major concerns.

Despite these challenges, the bank anticipates slight growth in underlying economic activity for the final quarter of the year, excluding the effects of the Paris Olympic and Paralympic Games. “We estimate that the country’s underlying activity would maintain its slightly positive growth trend in the fourth quarter,” the report stated.

This growth, pegged at approximately 0.2% of GDP, is expected to be counteracted by the waning effects of the Games, which the bank estimates will reduce GDP by 0.2%. As a result, the Bank of France projects no net growth for the quarter, marking a slowdown from the 0.4% growth recorded in the previous quarter, which was largely driven by Olympic-related activity.

The economic outlook remains clouded by political instability and broader global challenges. Businesses are increasingly cautious as they navigate the uncertain landscape, with some delaying investments or scaling back expansion plans.

Observers note that the political impasse could exacerbate existing economic pressures, particularly as debates over tax reforms and budgetary measures continue to weigh on business confidence.

The coming weeks will be critical as President Macron moves to stabilize the government and address the budgetary void. The resolution of these political challenges could play a key role in shaping France’s economic trajectory heading into 2025.

For now, the combination of political uncertainty, slowing growth, and global headwinds underscores the fragile state of the French economy, leaving businesses and policymakers bracing for potential challenges ahead.

European carmakers are falling behind their Chinese competitors in the electric vehicle (EV) sector, a crucial component of the European Union’s strategy to phase out internal combustion engine cars by 2035. In a significant development, Chinese battery giant CATL and multinational automaker Stellantis announced plans to build a major battery manufacturing plant in northern Spain, aimed at bolstering Europe’s EV capabilities.

The €4.1 billion joint venture will see the facility constructed in Zaragoza, with production of lithium iron phosphate (LFP) batteries set to commence by the end of 2026. The partners have committed to making the plant carbon neutral by leveraging Spain’s renewable energy resources, including solar, wind, and hydroelectric power.

The announcement follows a meeting in Madrid between Spanish Prime Minister Pedro Sánchez and CATL Chairman Robin Zeng. Spain, the EU’s second-largest automobile producer after Germany, is positioning itself as a key hub for electric vehicle manufacturing in the region.

CATL, a leader in EV battery production, already operates two European factories in Germany and Hungary. The new plant in Spain will enhance the company’s footprint in Europe and support Stellantis’s push to accelerate its EV transition. Stellantis, the parent company of brands including Peugeot, Citroën, Fiat, and Jeep, previously agreed to partner with CATL in November 2023 to advance battery production for its electric vehicles.

Challenges for European Automakers
The investment highlights the growing pressure on European carmakers to compete with their Chinese counterparts in the rapidly evolving EV market. While China dominates battery production and EV manufacturing, European automakers have been slower to adapt, partly due to lower consumer uptake of electric cars across the region.

To safeguard domestic industries, the EU has imposed tariffs on Chinese EV imports, mirroring similar measures by the United States. The aim is to encourage Chinese manufacturers to set up production facilities within Europe, creating local jobs and reducing reliance on imports.

However, European efforts to close the gap have faced setbacks. Northvolt, a highly anticipated European battery manufacturer, filed for bankruptcy last month, underscoring the challenges faced by regional players in competing with established Chinese firms.

A Pivotal Moment
The CATL-Stellantis collaboration marks a significant milestone in Europe’s transition to a sustainable automotive future. While it provides a much-needed boost to the EU’s EV ecosystem, analysts suggest European automakers must further innovate and invest to regain their competitive edge in the global EV race.

The Zaragoza factory is expected to play a vital role in meeting the EU’s ambitious green transition goals, but the road ahead for Europe’s auto industry remains uncertain amid fierce competition from China.