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One prime minister in and one out.
The situation is bleak and nobody seems to have the big picture that we are running into a cliff.
Historic moment that we have our first female prime minister.
So that in and of itself is a momentous thing.
Welcome to World Business Report from the BBC World Service.
I'm Sam Fenwick.
As Japan prepares for its first female leader, France is once again searching for a new prime minister, its fifth in just over 12 months.
Two very different political stories, but both set against a backdrop of economic uncertainty.
Plus a rare insight into life for women in Afghanistan, where Taliban restrictions have stripped away many of their rights.
So we start in France, where yet another government has collapsed.
Prime Minister Sébastien Leconu has resigned after less than a month in the job.
He's the fourth prime minister to lose his job since President Macron called snap parliamentary elections in the summer of last year.
His proposed cabinet faced backlash from across the political spectrum and, with no clear majority to pass a budget, he decided to step down.
I've been speaking to Andrea Hergert.
She's the co-founder of Fines, a fashion business in Paris which buys clothes from big fashion houses and then sells them on.
So we are indeed very much linked to this situation, because what we do is we help businesses, so fashion and cosmetic brands, to recover revenue from unsold stocks.
So this is very much a hot topic right now.
Because it's linked to cash flow and cost reduction.
So brands and boards inside the brands are looking to how they can revalue what they actually have.
Right now, it's really about, OK, we need to reduce the warehousing costs.
We need to recover revenue from our unsold stock.
And this is exactly what our services provide.
So we help brands with our tool to more easily recover revenue and sell the stocks, and to maximize margins and sell-throughs.
So, while you're doing quite well out of this sort of uncertainty in this economic climate, what that does demonstrate to us is that there's an underlying concern with your customers.
Yeah, exactly.
The concern is that we are in a situation of uncertainty and also consumer sentiment, where consumers do not want to spend as much as before anymore on fashion goods.
So there is also a decrease in consumption and also decrease in consumption for full price products.
So discounted products become more and more attractive.
And this is what also we are navigating in with our company in the discount market.
I think it says a lot about where we are in the current situation.
Yeah.
Let's bring in Emmanuelle Aureole into our conversation.
She's an economics professor at Toulouse School of Economics.
What do you make then of what Andrea was saying?
She's painted a sort of positive picture for herself, but underlying that is a pretty bleak situation for the French economy.
What we have seen is that consumers try to find bargaining.
And so because of that, the stock can be a source of bargaining, because they have to discount them a bit.
And that's a business model.
So people buy second-hand commodities, they buy discounted commodities.
And of course, the movement is growing.
I think the uncertainty is certainly adding to that, in the sense that people, when they time, are uncertain.
They tend to have a precautionary saving.
French people tend to save a lot.
And so I think they are going to save even more because they are concerned about where we are going.
Honestly, we don't know.
And this uncertainty has been going on for just over 12 months really now, hasn't it?
You're actually on to your, or you will be on to your fifth prime minister.
Oh yes, the situation is very bad.
So we had some kind of instability with the government.
We don't have a government right now.
It's not clear that we will have one.
The parliament is totally unmanageable.
So the situation is really bad, I think, politically.
The instability, the unpredictability of what is going to happen and the fact that we cannot control our debt, of course, are extremely, extremely a source of concern for everybody.
That has been the sticky point, hasn't it, with all of the prime ministers that you've had has been a budget, getting a budget over the line that everyone can agree on to try and reduce that level of debt.
Yes.
No, the problem is exactly that.
We have one third of the parliament that is extreme right, one third that is extreme left and one third that is more or less in the middle.
But this is the state of France.
And these people, they don't want to talk to each other.
They really want things that are totally contradictory.
And they put a red line saying if you cross this line, we will.
We don't vote a budget and we don't have a budget.
We don't even have a government right now.
So how does this situation gets resolved, do you think?
I honestly don't know.
I am really worried now.
There are a lot of very cheap politics there and nobody seems to be sensible or willing to make some concession.
So there are very short-termist political considerations and nobody seems to have the big picture that we are running into a cliff.
And that's really worrying me now.
President Macron's election that he called in the summer of 2024 was meant to bridge those political divides that you've explained.
Has that now failed?
And does France now need to go to an election?
Oh, it failed.
Yeah.
In my view, it was a mistake.
But on the other hand, I think if he didn't do that in the fall election, The government will fall exactly for the same reason.
For the budget, because the people on the left want us to spend more.
The people on the extreme right want us to spend less on immigration only.
I mean, so we have no way to find a compromise, apparently.
And that's really really now a big issue, because if we don't have a government, we don't have a budget.
And France is not a country like Spain or Belgium.
We cannot function without a budget.
We need a budget.
And so I don't know how this thing will be resolved.
But I'm not optimistic right now.
Andrea, what do you think?
Are you optimistic about it?
Do you feel like the country is running off a cliff, like Emmanuel was saying?
Well, to be honest, as an entrepreneur, you always feel like the mirror of everything that's happening in the country, but also in the world.
So it is very confusing.
We just started to fundraise a month ago.
So of course, everyone is telling us oh no no, this is the worst possible ever situation to do that.
But at the same time, you know companies that are in innovation and building innovation.
It's never the right time.
But indeed, it's very concerning.
And we feel this sentiment, especially when it comes to financial deployment.
So, for example, there is the public bank that has been usually helping innovative startups to support with non-dilutive actions.
But actually, since the past few months, they have reduced it.
So that's like a big shift because, as a startup owner, you always want to keep, of course shares, and maturity and non-dilutive help was indeed a support that we were also, for our round, for example expecting, but now it has really reduced to 30 and much more stricter rules.
This is, for example, a direct impact that I am feeling as a company owner in innovation and tech.
Do you think that policymakers understand the pressures on small businesses like yours?
I think they do, but maybe they just don't have the choice in this chaos right now, to be honest, because they have bigger problems to resolve first.
But I believe it's a danger because innovation and tech is the future.
And we are losing the momentum in France, definitely, and in Europe.
That was small business owner Andrea Hergert and Emmanuel Oriol, who is an economist from Toulouse School of Economics.
P.Y.
Jebeau is a French businessman who once ran Euro Disney.
It was a theme park.
He later took charge of London's Millennium Dome and now serves on the French Olympic Committee.
P.Y., you have worked around the world promoting French business.
You heard there from Andrea saying that she's very concerned that France is now falling behind.
How damaging is the revolving door of high ministers that France seems to be having?
Yeah listen, being in corporate rescue and turnarounds on my career.
You know I have a tendency to see the glass half full, not half empty.
Yes, it was a disaster from President Macron to dissolve the assembly.
He took a massive bet and he lost it pretty badly.
The revolving door is happening.
There's going to be whatever happens short term because basically everybody's posing.
It's not like it's chaos, right?
It's people who it's not only not seeing the big picture, but not respecting the French population to serve their own political interests, because they're basically both extreme left and extreme right, are pushing for national elections now.
The way it's going.
Is it time for an election, do you think?
I mean, can you really have a fifth prime minister?
Something's got to give, hasn't it?
Yeah, the force is not yet out of the door, because Monsieur Lecornu's got another 48 hours to test Parliament.
I think he will fail because again, the agenda is to push for an election on both extreme sides of the Parliament.
But, at the end of the day, Mr Macron can invoke I don't remember what is the law, but he can assume executive power until the end of his mandate, which it could well be.
So, again, that's not going to facilitate, you know, a budget.
But you know listen, most of the economies in Europe are facing the same issue having way overspent.
I was going to say we in the UK, but I'm a frog, so I'm not.
But you are in the UK.
You're talking to us from the UK.
PY Jabot, stay with us because we will come and talk to you again.
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In just a moment, this is World Business Report from the BBC World Service.
I'm Sam Fenwick.
Now, the situation for women in Afghanistan is dire since the Taliban returned to power in 2021.
The UN says that they've issued more than 100 orders restricting women's rights to work, to study and even to choose how they dress in public.
One woman has been sharing her story with our reporter, Hannah Bewley.
We've changed her name to protect her safety.
Economically, Afghanistan will never be able to go forward until women have the right to participate.
This is the boss of an NGO which works with women in Afghanistan.
We'll call her Miriam.
It's been devastating watching the options removed and wasting potentially, you know, half of Afghanistan's talent, the brains of these women, the energy, the compassion.
We need Afghan women. to fully participate.
What's the picture like at the moment in your sector for female staff?
It's incredibly difficult for our female staff primarily.
Every few months there's a different edict that gives another restriction or modifies a restriction.
The steps we have to take to ensure that women have a designated companion are what's called a mahram.
To take them to and from is very difficult.
You know, most NGOs in Afghanistan have completely segregated their workplace.
The other thing we've really had to invest in is well-being and psychosocial support, mental health support.
While we have, for the most part, been safe in our organization, we had an incident that was incredibly traumatic for our team.
And for our female staff.
Even though we provide mahrams, even though we support with transportation, even though we give them internets that they can work from home if they need to, every day they're faced with the fear.
Am I going to be stopped at a checkpoint?
Am I going to be Is my office going to be subject to a traumatizing inspection?
And on most days, those things don't happen.
But it's a fear that Afghan women live with every day and Afghan men as well.
The UN estimates that since the Taliban took power in 2021, they've issued over 100 edicts which seek to silence women in public, bar them from education above the age of 12, enforce head-to-toe coverings and restrict their travel, forcing them to use a mahram or male chaperone in many cases.
They're described as a chaotic mix of informal and formal decrees which are enforced inconsistently.
The most recent estimate from the UN shows that 78 of Afghan women are not in education, employment or training.
And that's one of the highest figures globally.
The World Bank has estimated that banning women from education and work could cost the country more than 14 billion each year.
In spite of the challenges, many women are finding a way to work, and NGOs were a popular sector under the Western-backed government before 2021.
Miriam told me about a specific incident which happened earlier this year.
I left to go to a meeting.
When I came back, the door opened to take my car into what we call an airlock situation, which is supposed to be a safe holding area, and a raiding entity from the de facto authorities came in with really, really magnificent show of force and many guns.
At the same time, you know, it speaks to the nuances happening.
You know, the information that they received or may have received about our organization to them warranted a raid.
It was misinformation.
It was resolved.
We sat down, we talked And we came to a resolution with various ministries and directorates that we needed to speak with.
But everybody who was there was traumatized.
And the uncertainty and the fear that continued over the next days, the weeks, was incredibly inhibitive to our work.
We had inspections into our programs in various provinces over the next week.
Everything was found to be fine and in alignment with policies.
But it was just yet another thing that was not necessary to go through.
An NGO worker we called Miriam was speaking there to Hannah Bewley.
The Taliban government has previously said that it respects women's rights in accordance with their interpretation of Afghan culture and Islamic law.
Well, while France searches for yet another leader, in Japan there's a clear prime minister in waiting.
Sange Takichi has won the leadership of the ruling Liberal Democrat Party, putting her on course to become Japan's first female prime minister.
Markets rallied on the news, but rising bond yields suggest that there is concern her policies could push Japan's debt even higher.
Rintaro Nishimura is an associate at the Asia Group in Tokyo and explains the different economic reactions.
The election of Anai Takeuchi, who is one of the more conservative lawmakers in the ruling party, closer to Shinzo Abe, actually does indicate to the markets It's more likely that she will introduce expansionary fiscal policy, meaning she'll likely to spend more on fiscal policy or, in general, just on policy, compared to Kishida or Shigeru Ishiba, who is currently the prime minister.
And that has obviously led to the market reacting positively in the direction that would actually help businesses and allow for them to invest more.
And stocks like related to defense and other areas, technology that Takaichi is known to be very keen and interested in have gone up quite a bit.
So I think those are some positive signs, at least for now.
The yen, though, that weakened slightly, didn't it?
And is that something to do perhaps with her more hawkish approach to foreign policy?
Yeah, I mean.
Obviously there is a risk involved with any new prime minister, but especially with this one being a more conservative, hawkish prime minister.
The market is obviously concerned about foreign relations, especially when it comes to China, South Korea and these other neighboring relations.
I'm not so sure if that's related to the US in particular, because there's also the possibility that someone like Takahichi might actually fare better with someone like Trump, who both of them are quite nationalistic.
And part of the draw of Takahichi was a sort of Japan first type of policy platform.
So there seems to be a little bit more alignment between the two of them.
So I think most of the concern is with the way in which countries like China, for example, will react to this new prime minister and the policies that they implement going forward.
Because she has said over the weekend that she will try to renegotiate the trade deal, won't she?
With Donald Trump?
So I think that was taken slightly out of context by obviously the media reported that one kind of headline.
But what she said exactly was that if there's any reason to believe that the implementation of the investment portion of the trade agreement is not meeting japan's national interests, then there's a possibility that that should be discussed with trump, not this time in october when trump comes, but going forward as the relationship builds and as the trade investment portion is implemented.
I think that's what she meant.
I don't think it means outright that they're going to review the entire deal and then try to renegotiate it so exporters perhaps will be happy with her response as you've interpreted it.
Yeah, I mean.
I think that, coupled with the expansionary fiscal policy, but also with the way in which Takaichi isn't coming off as hawkish or as dramatic as she was in last year's election, I think she was much more aggressive on her policy stance last year.
I think this year she did tone it down a bit.
I think, learning her lesson from last year, when she won the first round of the presidential election but ended up losing in the second round to Ishiba, who was deemed more stable than Takaichi.
I think she did choose a little bit more careful rhetoric this time around.
You've explained that she's quite keen on government spending to try and boost the economy.
But what will that do to Japan's debt mountain, which is already pretty huge?
And that was one of the questions actually that was asked of her at her first press conference over the weekend.
As much as she does propose or advocate for expansionary fiscal policy.
She has also mentioned that it would be within reasonable bounds and that it's more of a she described as crisis investment, crisis management investment.
And she did refer to the fact that she is still going to keep in mind that her government will work to reduce the debt to GDP ratio.
That was Rintaro Nishimura, from the Asia Group.
He was speaking to us from Tokyo.
International businessman P.Y.
Jabot is still with us.
We heard from him earlier.
P.Y., we hear about the debt mountain there in Japan and it possibly will grow further.
We've been talking about the challenges of trying to get a budget sorted in France.
As investors, as a business person, what are you looking at when you see these discussions going on at a political level?
Oh, we've lost PY.
Well, I tell you what, let me go to Peter Jankowskis.
He can join us in the conversation there.
Vice President of Research and Analysis at Arbor Financial Services in Chicago.
You're an investor.
What are you looking at when you're looking at this kind of these levels of debt, Peter?
Well, sustainability is the key question.
Certainly, government debt is necessary, obviously because they do need to finance spending at various times.
But when you get to the point where your service load, in terms of the interest you're paying, begins to dwarf the actual outlays, that becomes a real problem.
You simply can't raise taxes enough to support that in the long run.
PY, I think, can hear us.
PY.
Do you agree with Peter that if it's serviceable debt it's OK and you'd be willing to invest as a business person?
Yeah, the problem is not it's not OK.
But again, France is not alone.
You're Japan.
I mean, having lived in your lovely country for 25 years, this is the same.
And the constitutional crisis is just delaying the fact that France need to find saving of 40 billion euros.
So that's why whoever is going to take charge at the 27th election is going to face that issue.
That's why it needs to be a proper government with a proper majority, because right now everybody's pancing for forcing Macron out, so that they can get the general election now.
But it's just delaying the inevitable.
France...
You know, it's pretty much unsolvable as a business.
They will be in Chapter 11 tomorrow.
So we need a proper government, but we need to face the music that, you know, we've overspent.
And as soon as you touch civil servants and public services, it's an issue.
OK.
You know, it does need a proper turnaround and a proper aggressive approach.
We'll leave it there.
Thank you very much, PY Jebo.
Peter talking about France's political gridlock, Japan's spending dilemma.
The budget fight continues in Washington as well, doesn't it?
The US government shutdown is now in day six.
Donald Trump is tightening the screws a bit on congressional Democrats, threatening job cuts if there isn't a resolution by the end of Monday.
How likely is that?
You're kind of reaching the end of your business day, aren't you?
Yeah, it's pretty tough.
I think Donald Trump is trying to force a quick resolution.
From the GOP standpoint, I think where this starts to bite is really the middle of October, which is where people will not get paid at that point.
And that could have some real follow-on effects, of course, for the economy.
If they're not getting paid, they're going to probably start pulling back on their spending, and that has a pullback effect.
So he's working as hard as he can to to resolve that.
And, of course, the Democrats can't back down due to political pressures from their left flank within the party, because they feel that they gave in too easily earlier on on these issues.
Feels like you need PY Sherbo in there, maybe banging some heads together.
I want to talk to you about the shares of the US chipmaker Advanced Micro Devices.
They searched, didn't they?
They've done a deal with OpenAI for an AI infrastructure.
How significant is that deal for the company's future?
Well, if OpenAI is able to fund it and actually build out those centers, it could be huge.
We went through the same sort of thing with Oracle a week or two back, where they announced a huge deal to work with OpenAI.
The real issue for OpenAI is their funding.
How much money will they be able to bring in from the outside to build all this infrastructure out, because they need the infrastructure before they can generate revenue on their own.
They all do seem to be investing in each other, don't they?
They are, yes.
It's certainly a very self-reinforcing cycle, all being driven by the hope that down the line there will be enough demand for all of these AI services that they're building out.
Do you think it's a dangerous strategy that they've got themselves into?
Have you seen it ever before with new tech?
Well, it certainly is the type of thing that has occurred in the past.
You know, there was a lot of rush, obviously, toward Internet-related businesses.
You know, of course, the famous Internet bubble.
The dot-com bubble, yeah.
So there is a very real danger that this rally could get ahead of itself and collapse on itself, even though AI, in the end, just as the Internet, could prove to be a very valuable and useful tool.
Peter Jankowski, as ever, thank you for joining us today on World Business Report.
And thank you to you for listening.
Don't forget, you can always get our podcast.
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