“Financial Virtues of the Frugal French”

Marketplace: Financial virtues of the frugal French 101708:

John Laurenson: Tonight, what with the financial crisis, it’s pig’s foot for dinner, not the seafood platter. But in France, people are used to living on a budget. Partly because it’s much more difficult than in Britain or the United States to spend money you don’t have.

Bruce Antolovich is an American who’s been living in France for seven years:

Bruce Antolovich: Most of the things we call credit cards in France actually are debit cards which debit directly from your account. And usually the negative balance that they allow you is much, much lower than the credit limit you’d have with a typical credit card in the U.S. I would say about $1,000.

Easily enough to afford the mountain bike Antolovich rides several times a week. He got seriously into cycling when his bank made him pass a medical to qualify for a mortgage. He had to take out life insurance, too.

Bernard Vorms is general manager of France’s housing information board. He says guarantees like these plus fixed rate loans go a long way to explaining why there hasn’t been an increase in mortgage defaults in France despite a bearish housing market.

Bernard Vorms: We are not risk lovers. It’s easy to get a mortgage if you have a full-time, regular job, but if you have irregular income it will be difficult.

That conservative approach extends to the relationship between investment and retail banking.

Christine Lagarde is France’s Finance Minister. She says that is helping French banks weather the storm.

Christine Lagarde: They generally operate on a business model which is 75 percent retail, 25 percent investment and market..

The waiter serving me my pig’s foot would be the first to say all is not well with France’s economy — 3,000 restaurants and cafes went out of business in the first three months of this year. Compared to the U.S., salaries are lower and more people are out of work. But in these panicky times, France’s banking system looks a lot more trustworthy.

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