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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing and on this edition, France's Prime Minister tells MPs excessive debt is life-threatening for his country, as his government is poised to collapse over austerity plans.
So, what does the French business community think?
For business.
It's not so good, especially for small companies, so I'm a bit afraid that we will have another period without a government.
Also today, a slightly glum Munich car show as European automakers face growing challenges.
And can AI make movies faster and better and cheaper?
But let's start with France, which is in a bit of a mess.
In the next few hours.
It's widely assumed the man who's been prime minister for the last nine months will be out of a job.
François Barreau, a 74-year-old political veteran put in place by President Emmanuel Macron to find a way out of a years-long crisis, is instead about to be consumed by it, when he almost certainly loses a vote of confidence in the country's parliament.
The Eurozone's second biggest economy is mired in debt, 114% of its annual economic output.
And the Prime Minister hasn't introduced an austerity budget aimed to slash government spending by 44 billion euros.
But he doesn't have the votes to get it through.
Monsieur Bayrou has been addressing the members of Parliament in the past hour and he appealed for them to back his moves to improve his country's financial standing.
Excessive debt, he said, was life-threatening for France.
His words have been voiced by an interpreter.
We spend, we spend, we spend, but we never come back.
We never tighten the rope.
The ordinary expenditures of our nation, for the public services, for the pensions, for the welfare of our nation.
We keep on spending it by borrowing more and more credit to put the balance back to zero when we had to credit more, just like every family, every company.
And we keep on borrowing and borrowing and borrowing 3415 billion euros of debt at the time that I am speaking to you right now.
François Bayrou.
But MPs are set now to vote against him, and in that case he will resign.
So what happens next, and what will this do to France's economic confidence?
The France-based journalist, Jamie Smith-Mayer, has been talking to business owners in the Loire Valley and he sent us this report.
There is one word that's been heard a lot recently in French politics.
And today, France's Prime Minister François Bayrou, in the job since December of last year, is laying out his government's austerity measures to address the burden of debt.
He is asking the National Assembly in a vote for their confidence in his plan and essentially, his government, leading potentially to his own downfall later today.
But for France, with a debt-to-GDP ratio of 113, the regular approaches of taxing more, reducing spending or boosting growth are all at the centre of the debate.
This weekend at a café in the Loire Valley city of Tours, I asked the economist and academic Gilles Collida about some of the reasons behind the country's burgeoning debt, triggered mostly by two crises also experienced by other Eurozone countries.
Two events have significantly increased the weight of the debt difference.
The first event is the subprime crisis in 2008-2009, and the second event is the COVID-19 pandemic.
Most of the other European countries managed to reduce their debt burden and decrease their deficit during the decade 2010.
But the different French governments in place during this period did not do so because it is politically and socially difficult to cut public spending and to raise tax.
Prime Minister Bayrou will propose a raft of austerity measures seen as fairly standard.
Gilles Colluda told me to reduce the debt burden by 44 billion euros.
Among them are reducing thresholds for health expenditure reimbursements, a hiring freeze on certain public service posts, but also a so-called année blanche in 2026, a blank year where social benefits and pensions are to be frozen.
Tax brackets would be adjusted and an unpopular measure of removing two public holidays to boost production has been tabled.
Other factors mean it's a difficult time to implement such measures.
Gilles Colleda.
The context is not favourable.
Weak growth, high interest rates and tension in global trade.
So we need to repair the roof in the middle of the storm.
For some in business, the uncertainty and instability has led to frustration.
Grégoire Audubert is the co-founder of Winter Mushroom, a software publisher offering marketing products to retail.
To be honest, I feel a bit tired of all the uncertainty caused by the politics.
And for business, it's not so good, especially for small companies.
And I'm afraid what is going to happen Monday is going to be the cherry on the cake.
So I'm a bit afraid that we will have another period without a government.
But for some businesses, there was still a sense of wait and see.
Jérôme Bonvin is the co-owner of a bar in Tours.
And he told me it was too early to decide what the measures are.
The potential collapse of government would mean.
We're all waiting for the announcements that will be made in the coming days, and there will be inevitably financial impacts on business in terms of levies, notably for welfare, and we can't quite see where we're going right now.
It's too soon to judge current measures, whether they will be kept, toughened or softened.
So should I come back in a week?
Yes, we'll talk about it later.
That report by Jamie Smith-Mayer, who joins us now, live from France's parliament, Paris' Assemblée Nationale.
Jamie, thanks for being with us now.
We heard Monsieur Bayrou earlier speaking about the problem of debt.
What was his message really to MPs?
Yeah well, it was clearly a message and address that lasted some 40 minutes here to the National Assembly, a lower legislative chamber in France and a full house.
And I should also say that I'm in the garden just now, pushed past a number of journalists, the full house there too, showing the significance of today's speech and vote.
Essentially, a message that came from him was for parliamentarians to seek common sense and general responsibility.
Bayrou started out by saying it was not a political decision, but a historical one that lay ahead.
And he compared the country and the debt crisis to a sinking ship, and that change had to be brought about for future generations.
He mentioned the challenges facing the economy housing, the aging population and said that the social model was on life support.
So a call really to MPs for the country in the longer run to look to that and go above party politics.
But as we've been hearing the way things sit in Parliament, it looks like the vote is still not to fall in favour, with him and with the blocs in the far right and the left likely to vote against the confidence motion later today, leading Bayrou probably to his resignation.
So then, the obvious question, what happens next?
Is there another prime minister in waiting?
Well, that is the question.
That's what we're hearing there from businesses.
There's this period of uncertainty, and it will be up to the president, Macron, to appoint someone.
There are a few names being floated around, but if we look back to the previous periods, it may take some time for a prime minister to be chosen.
And of course, there will be calls from parties, the bloc on the left but also the far right to look elsewhere for a prime minister, but also even calls for Macron to dissolve the National Assembly or for him to resign.
Now he has said at the moment in time he will do neither of these and he'll be speaking potentially for a new prime minister.
Jamie, thanks for being with us there.
Jamie Smith-Maillet live there from the French Parliament.
Let's talk now to Charlotte de Montpellier, an expert in France's economy and senior economist.
Charlotte, thanks so much for being with us.
I mean, the root of all this, of course, is the crisis in the economy.
How much of a burden is this enormous debt, 114% of GDP, that France has?
Yeah, it's a big burden, especially because it's not going to fade.
It's not going to improve the situation as such.
We know that if nothing is done, the debt will go to 125% of GDP into 2029.
Why is that?
It's because of the cost of aging.
So the population in France is going down.
And that is having a big impact on public finance because there is a big system of social security, that pension.
They cost a lot of money, and even more than in other European countries.
And so, as such, this is a problem the aging of the population, because it costs more and more, and it leads by itself to an increase in debt compared to GDP.
You add to that the fact that GDP growth in France is relatively poor uh low and uh lower than in other european countries and, of course, you have a difficult situation from a public finance point of view.
Uh, the thing is that we know that at this point it's stuck, but at some point there will be a need to fix the situation and uh, the more we wait, of course, the more costly it will become.
But, of course, from a political point of view it's it's very, very difficult.
And we become even more difficult because, as I said, the ageing of the population is the problem.
And there are a lot of people that are getting older.
So it means that from a political point of view, it's very difficult.
Well Charlotte, but surely I mean people would say well France.
It's the second largest economy in the eurozone.
However high that debt burden goes, people are still going to lend money because they're reasonably confident of being paid back.
Yeah, of course.
So the thing is that there is an iron risk premium at this stage.
And because the public finance situation is has been deteriorating quite strongly and is going probably to continue to deteriorate.
It does not mean that we are in a situation such as the one with Greece back in the days.
So it's not that we are facing a big public finance crisis.
It's just that it's very clear that the trajectory will not be the one that was announced to the market and to the European authorities back in April.
So it means that it will be more deteriorated.
And of course, for that, investors are asking for a premium.
So that's the thing right now.
We know that there is some economic activity in France.
So there is always the possibility to increase taxation.
And there yeah, it's kind of helping to assess that the situation is not going to escalate too much.
But of course, it's more risky than a few months ago and certainly than a few years ago.
And in brief, at root, the problem is the welfare system.
It's not a problem for the people who have it, but it is a problem for France to support it, isn't it?
Yeah, exactly.
Because the weight of this welfare system is becoming bigger and bigger simply because the population is aging.
So it means that there are more and more people that need to I mean that receive pension from the state, and it costs more and more money.
And of course, this is an issue because it's not going to solve by itself.
And yeah, that as such is the issue.
The other issue is that growth is quite low and it's a bit the same in all European countries.
But of course, with a big welfare system, as it is the case in France, it's very difficult to sustain that if you have low growth.
And this is the situation in France and that is not likely to change a lot in the future.
So both together, it will remain a problem.
Charlotte, thank you so much for being with us.
Charlotte de Montpellier there.
Well, let's reflect on how this works in terms of market confidence.
Let's talk to Rachel Winter, partner and investment manager at Killick & Co., who joins us now.
Rachel, thanks for being with us.
First of all, just a reflection on that.
I mean, are people still willing to invest in France?
Is the French stock market reasonably strong?
Well, we've actually seen a decline in confidence in the French market over the last year.
And we can look at that by reviewing both the equity market and the bond markets.
So, if we look at the French equity markets, that hasn't really gone anywhere for the last year.
And that's in comparison to other European markets that have been quite strong.
So, Germany, for example – has had a very good year.
So in comparison, France has been quite weak.
So that reflects a lack of confidence.
And then we can also look at government bond yields in France.
When government bond yields rise, that suggests that people are selling government bonds because they don't want to hold them.
And in France, over the last year we have seen that government bond yield for 30-year bonds rising from 35 up to 45.
So that really does show a lack of confidence.
Yeah, and compounding France's problem, of course.
Well, let's talk about another couple of countries that are undergoing political issues at the moment, which again perhaps affects their economies.
I mean, Japan, for example, the prime minister has gone there.
We talk about prime ministers in France.
Prime ministers have already gone in Japan.
And markets are pretty worried about that, aren't they?
Well actually, if we look at the equity markets, it hit a record high after the prime minister resigned last night.
A popular measure.
Yeah, they seem quite happy about this.
I think the reason is that the potential successor to the prime minister is someone who is keen on deregulation.
And that could potentially be good news for Japanese companies.
Therefore, we've seen the equity market going higher.
But if we look at the bond markets, again, there is a bit of concern showing there.
We have seen the yield on Japanese government bonds rising.
That suggests people are feeling a little bit less confident lending to Japan and potentially, that they are a little bit concerned about inflation.
Now let's also talk about a small country in population terms, quite a giant in terms of finance, particularly their sovereign fund, sovereign wealth fund Norway, of course voting today.
The right certainly pushing very much for reform to the wealth tax.
They say that stymies investment and growth.
I mean, does Norway have a growth problem?
Well, not necessarily at the moment.
What I was quite interested by just looking at this Norwegian election was that people are protesting about the cost of living.
Now I think historically Norway has been a country that has had a reputation for a very good quality of life.
And it has been a country where the rate of tax has been quite high.
But people have apparently been quite happy to pay that high rate of tax because they feel they get a lot back for it.
So it's Interesting to see potentially, that that is changing and that Norway doesn't seem to be immune to this cost of living crisis that is impacting the rest of the world.
Indeed, Rachel, thank you so much for being with us.
Rachel Winter there of Killick and...
The U.S. electric grid is approaching a breaking point.
As demand soars from data centers and home energy use, our aging infrastructure can't keep up.
And the Department of Energy warns that without action, blackouts could surge 100-fold by 2030.
The good news?
One solution is already here.
Propane.
It's American-made, stored on site and always ready, powering homes and businesses with cleaner, reliable energy that doesn't depend on the grid or the weather.
Learn more at propane.com.
In business, they say you can have better, cheaper, or faster, but you only get to pick two.
What if you could have all three at the same time?
That's exactly what Cohere, Thomson Reuters and Specialized Bikes have, since they upgraded to the next generation of the cloud Oracle Cloud Infrastructure.
OCI is the blazing fast platform for your infrastructure database, application development and AI needs, where you can run any workload in a high-availability, consistently high-performance environment and spend less than you would with other clouds.
How is it faster?
OCI's block storage gives you more operations per second.
Cheaper, OCI costs up to 50% less for computing, 70% less for storage and 80% less for networking.
Better in test after test.
OCI customers report lower latency and higher bandwidth versus other clouds.
This is the cloud built for AI and all your biggest workloads.
Right now, with zero commitment, try oci for free.
Head to oraclecom strategic.
That's oraclecom strategic.
You're with World Business Report from the BBC World Service.
Now the Munich car show is usually a glitzy and glamorous display of the latest models by an industry that thrives on style and high tech.
But a lot has changed this year.
It's a more subdued affair, as European carmakers face a series of problems sinking sales in China, tariffs on sales in the US and tough-to-meet carbon emission targets for 2035.
And the Chinese carmakers are there in force with their cheaper electric vehicles.
Automotive consultant Thomas Aurich is in Munich and he told me how this year's show is resembling a race between Chinese and European carmakers.
We are in a race and one colleague told me one hour ago hey Thomas, in the past the Chinese went to the German cars taking photos and trying to copy it.
Nowadays it's the other way around.
And a lot of exhibitors.
They are contributing software, they're contributing computing, but it's not a really typical car technology.
But in the future, car and computer will merge together.
That's the fact.
In terms of getting people to embrace EVs, electric vehicles, is price the big thing now?
Are they trying to look a little cheaper, perhaps, in order to compete with China?
Yes, we are wondering how the Chinese can manage that to bring really extraordinary high quality cars on the market for low prices.
And Volkswagen have really showed that they really are, I would say, they're brave enough.
They want really to put in.
New cars on the market, like the Polo, which in the past was not cheap, but it was a very reasonable car for a family.
And they want to put such a car as an EV car, also a hybrid car, on the market again.
Also BMW, but on a much higher price level, will go forward on that.
And what about the shadow of tariffs, the U.S. tariffs?
Is that making carmakers even more gloomy, really?
No, not only the carmakers, also the suppliers, because here we're talking about a very dramatic thing, because it's not only the tariffs for the carmakers.
The tariff has an impact also on the pricing in the whole supply chain.
And we have here different things, for example, that some suppliers have to say, like also some manufacturers okay, we have to think about going more actively in the USA, to be there active with manufacturing.
And this has an impact on the German and European car market and working places for sure.
But nevertheless the question is also If you are part of, I would say, a financial ecosystem, you have real difficulties to plan your profit.
And you need an idea about your profit in the future to go to a bank to ask for some money.
And normally, investment is based by money from the bank.
Thomas Auerich speaking to me from Munich.
Earlier this year, the US President, Donald Trump, unveiled plans for selling a gold card visa for 5 million that's going to offer wealthy buyers permanent residency in the US and a path to citizenship.
Globally, those sort of schemes have been controversial.
Do the super-rich use them as a tax plan, an insurance plan, or something else?
And should jet-setters with deep pockets be able to skip the queue?
Our reporter Josh Martin has been meeting some of those people to find out.
Migration to the United States has been symbolised by the green card for more than a century, but US President Donald Trump's latest announcement on visas took a more optimistic tone and a more eye-catching colour.
The gold card, remember the words, the gold card.
While cracking down on undocumented migrants, the White House launched a plan to hand out residency visas to any foreign investors who passed background checks, so long as they paid up.
We're going to be putting a price on that card of about 5 million and that's going to give you green card privileges plus.
It's going to be a route to citizenship, and wealthy people will be coming into our country by buying this card.
But a few months on, after the gold card website has launched, it's still waiting for the details.
Despite what the president told reporters in the Oval Office, residency by investment and its relation, citizenship by investment, have existed for decades.
They even share a similar nickname as Trump's gold card, commonly called golden visas and golden passports, respectively.
When Portugal launched its Golden Visa program in 2012, it hoped that foreign investors would revive its property market after a crash.
The program caught the eye of Hong Kong citizen Lily Chan.
We travel to Europe. at least once a year for holidays and things.
So I have been to Portugal before.
It was peaceful, safe, good weather, good food, and it's cheap.
2017, I was thinking about retirement and try to diversify my money.
It's an EU passport, so I will be free to go to different countries.
I don't have to live in Portugal at the end, even I get a passport.
And I only need to spend seven days out of a year there.
The property is cheap.
And although golden passports might grab the headlines due to alleged criminals exploiting them, golden visas can offer an insurance policy for citizens living in politically dicey circumstances.
No wonder then that historically, they've been purchased mainly by citizens of mainland China and the Middle East.
Hong Kong's political situation also influenced Lily.
The golden visa program that Lily used for Portugal, which was based on residential property investment, helped channel 75 billion euros, or 87 billion dollars, into the Portuguese economy.
But it no longer exists, in part because of the overheating housing market in places like Lisbon, where Lily bought and renovated her apartment.
The list of places that'll grant you a golden visa is actually growing, even as the EU pulls up the drawbridge on a back route into the bloc.
But one country at the bottom of the world is drawing the type of wealthy people President Trump would like to invest in the United States.
And they're not from China or the Middle East, they're from the US itself.
Well, I had been traveling to New Zealand for quite an extensive time, more than 30 years.
And I made the decision to move my business there and also to move there full time.
So it was natural for me to enter the country as part of a program to bring investment into New Zealand.
That's Mark Bergman, a US tech investor and venture capitalist who moved from Silicon Valley to New Zealand under a previous iteration of the small country's Golden Visa program.
I view it more as opportunity.
I'm investing in New Zealand and I'm expecting to see significant economic return.
It's sort of up to me if I do a bad job.
Obviously, I won't see those returns.
But my hope is that I will make significant return and create great value within New Zealand.
Mark's level of commitment is somewhat of an anomaly of these programs.
For the poor island nations of the caribbean and pacific who first started selling passports, it was a near perfect product.
Selling official documents boosted government revenues, while the super rich would rarely relocate or put pressure on public services.
New zealand's investor visa was designed to be the opposite of that.
The vast majority of the world's population will live, work and die in the same country they were born into.
Golden visas offer a way around this for the wealthy few.
But countries joining the multi-billion dollar marketplace offering residency and then passports to the highest bidder may find that investors are not necessarily loyal shoppers.
Josh Martin there talking about golden visas.
Now.
AI has been involved in many aspects of filmmaking, but the Wall Street Journal is reporting today the leading AI company OpenAI, is putting its muscle behind a full-length animated movie aimed at the Cannes Film Festival next year.
The film called Critters is intended to show generative artificial intelligence can make movies faster and cheaper than Hollywood does at the moment.
Critters is about forest creatures who go on an adventure after their village is disrupted by a stranger.
Audiences expect the struggle of survival, the hunt.
Can you at least let me film you eating?
Ooh, I'm insect intolerant.
Oh.
I can't eat bugs.
Can I eat your sound guy?
No.
Everyone please stop talking.
Well, a flavour there of critics.
Well, it's got a budget of less than $30 million, far less than what animated films typically cost.
The production team plans to cast human actors for character voices and hire artists to draw sketches that are fed into OpenAI's tools.
So is this the future for animated movies?
Well, Dr Dominic Lees is lead writer on AI for BFI's Sight & Sound magazine, also associate professor of filmmaking at the University of Reading, and joins us now.
Dr Lees, thanks for being with us.
I mean, is this what is going to be happening now?
Are we expecting that because it's cheaper and faster?
That's how animated movies, at least, are going to be.
It's absolutely the case that there will be a major section of animated film that will begin using AI in exactly this way.
Animated film is really the easiest form of film for AI to get its teeth into.
And already last summer, summer 2024, we had a couple of low budget animation films that have been generated by AI.
And this is the first project we've seen so far that's really going to try to hit the mainstream.
And it's interesting because obviously there's a lot of concerns in Hollywood after the strike against AI that we saw a year or two back.
There's clearly concerns about this.
Is it going to put a lot of actors and I suppose producers out of work?
Well, that depends on which tools they're using and which forms of labor they want to replace with AI.
This Critters project intends to use human actors as the voices.
And, as we all know from the mainstream animated films that we see in multiplexes, it is the draw of the celebrity actor voice that often gets people to come to the cinema to watch the new animated feature.
And at the end of the day, I suppose the thing is the money is involved.
If you're paying humans, it costs.
If you're not, it isn't.
Absolutely.
But also speed of production in terms of making animated films faster and cheaper.
That's the real opportunity here, because a lot of the processes of creating animated films are extremely labor intensive and very, very slow indeed.
If they're able to prove that you can speed this up, then industrially, the animation industry has got a real opportunity.
Dominic Lees, thanks for being with us there on the line talking about this new film project.
And could we all be seeing, well, much more in the way of artificial AI animation before?
Very long.
Anyway, that's it from this entirely live and human edition of World Business Report.
For me and the rest of the team, bye-bye.
