Analysis of intra-European relations, the example of France and Italy

At a time of globalization, it would seem logical that the so-called developed countries invest in less affluent countries or developing countries where labor is cheaper, thus lowering production costs as well as taxation. Yet, thanks to the creation of the European Economic Community which became the European Union in 1992 after the Treaty of Maastricht, European countries invest mostly in their direct neighbors. One of the initial goals of this community was indeed to bring significant economic rapprochement between the Member States. The introduction of the Euro in 1999, facilitated this phenomenon, and confirmed an overall trend that had begun in the 1950s which has since grown steadily. Today, France is investing three times more in Germany and twice more in Italy than in China, and receives in return a relatively comparable investment. This seems contradictory, as the value of investing in a similar economy is questionable.

What makes such trade important? How is it that despite increasing international competition, relations between European countries do not break down? These are the questions that the author’s Individual Project Tutor will attempt to answer. To do so, a restriction is applied to a specific example: the Italian investments in France. In the first part, there will be a study on the composition of the foreign direct investment (FDI) in France from Italy to understand that two neighboring countries whose economies are very similar may well participate in exchange. In the second part, a study on the way France has succeeded in convincing Italian investors to trust it and thus retaining Italy in the group of its main partners. There will also be a study on the Italian interests obtained through these investments.

International investment occupies a increasingly important place in the Italian and French economies as in all developed countries. In France, international investment now represents 35% of industrial production and about 40% of industrial exports and investments. Italy is in fourth place in countries that invest the most in France. This explains the emphasis on the analysis of the situation of Italian investment in France. In the first place the great Italian groups in France, found FIAT but there are a lot of other small and medium enterprises (SMEs) located in France.

The French and Italian companies to increase their competitiveness are also investing in the countries of Central Europe which led France to create the French Agency for International Investment (AFII). The purpose of this agency is to retain and even attract new investment in its country to avoid bending in front of the sometimes unfair competition from newly industrialized countries. This agency, under the Ministry of Finance, Economy and Industry operates in close partnership with local authorities.

During the first European conference on international investment in La Baule, the French prime minister at the time Jean-Pierre Raffarin confirmed the government's commitment to carry out a program for the attraction of the area. An intense program that allowed to propose a set of measures to strengthen the competitiveness of France, which entered in to force in January 2004. The attraction of the area becomes a point increasingly important in economic policy because of increasing global competition.

Tags: inter European relations; an analysis; Italy and France; international investments;