Wie kam es zur wirtschaftlichen Talfahrt in Frankreich? Diese Grafik der letzten zweihundert Jahre liefert die Antwort

In the 19th century, the French Franc was among the most stable currencies in the world. However, high national debts and inflation led to a massive devaluation of the currency. France is now the sick man of Europe, with the government needing to urgently cut spending to curb its mounting debt. Yet the country is politically blocked and President Emmanuel Macron is barely able to act.

Loss of confidence in French government bonds has further exacerbated the downward spiral. The yield on 10-year government bonds has risen to a worrying 5 percent, the highest level since 2002. The risk premium over German government bonds has doubled since the summer. The country is now even worse off than previous worrywarts Italy and Greece.

In stark contrast, France historically counted among the financially strongest nations of the world for long periods of the 19th century. The country suffered two painful military defeats: in 1815, Emperor Napoleon I was defeated at the Battle of Waterloo, and the Franco-Prussian War ended in humiliation in 1871 with the loss of Alsace and parts of Lorraine.

Economically, however, France prospered. Paris became a modern metropolis with grand architectural marvels, and the city became the undisputed center of Western culture, culminating with the Belle Époque. While Britain remained the economic leader, France continuously narrowed the gap. The German "eternal rival" only caught up at the end of the 19th century.

France's brilliance also rested on the stability of its currency. In 1803, Napoleon established the Franc's link to the precious metals silver and gold – later it was only linked to gold. The currency remained as stable as the British pound, the global benchmark at the time, until World War I. Switzerland benefited greatly from the French Franc.

Until 1798, on French pressure, the Swiss Republic was founded without a unified currency. Instead, dozens of local institutions minted their own coins, bearing names like pennies, talers, rossels or cornuts. This changed with the French occupation in 1798. Not only did the invaders loot thousands of ounces of gold, which the cantons held as currency reserves, but they also introduced the "franc suisse" as the national currency, inspired by France.

"For Switzerland to develop into a modern federal state, it needed its own national currency," says economist Costa Vayenas, who published a book on the history of the Swiss franc last year. While Napoleon later returned mint control to the cantons, the Franc remained a crucial monetary reference value. The Swiss Federal Constitution of 1848 paved the way for the definitive introduction of the franc as the national currency, tied to the French Franc, and the first coins were minted mainly in Paris.

Some cantons, primarily in the German-speaking Switzerland, would have preferred to anchor their currency to the southern German gulden. "The Franc, however, possessed greater trustworthiness," says Vayenas. "This is evident in the fact that those cantons that had already anchored their currency to France enjoyed significantly lower interest rates."

This dependency deepened when Switzerland joined the Latin Monetary Union in 1865, under French leadership, becoming the most important monetary region on the European mainland, which included Italy, Belgium, and temporarily Greece. Further states such as Austria-Hungary, Spain, or Romania informally aligned their currency with the union.

Vayenas calls this membership a stroke of luck for Switzerland, although monetary policy was largely dictated in Paris. "In this period, the franc laid the foundation for its later rise as the strongest currency in the world," says the author. The banking sector also benefited from the absence of exchange rate risks and cross-border trade facilitation.

"Its status as a flight currency with global reach was earned only after the shock of World War I." In stark contrast to the prosperous France, the war-torn country saw the Franc lose its luster after 1918 and embark on its ongoing decline. This is evident in the drastic depreciation of the French Franc against the Swiss Franc. While the exchange rate in 1914 practically remained the same as a century earlier, it plummeted by a nominal 30 percent alone by the end of the war, four years later.

To pay off the enormous war debts, especially to the USA and Britain, the Central Bank resorted to printing money, causing an inflation wave. By 1928, the Franc had lost four-fifths of its previous purchasing power. "The French currency has never recovered from this shock," says Vayenas. "It is a textbook example of how a debt crisis can also undermine a country's monetary stability."

Vayenas has compiled a data set spanning over two centuries of currency devaluation in France and Switzerland. The result is striking: Both countries enjoyed relative price stability until World War I. However, inflation exploded afterwards.