What can France do to prevent West African countries from ditching the CFA Franc?


Leaders from eight West African countries met in Abidjan, Ivory Coast on Friday to discuss ditching their currency - the CFA franc - for the "ECO", a new currency that leaders of the 15-member Economic Community of West African States (ECOWAS) aim to launch next year.

Would the adoption of a new currency affect France's financial power? which isn't good for France. What can France do to prevent these West African countries from ditching their currencies? Is going to war an option for France?

  • 9
    This question contains an unwarranted assumption: "The adoption of a new currency would really hurt France's financial power, which isn't good for France." Please provide a source describing how France's financial power is enhanced by the existence of the CFA Franc. – phoog Aug 13 '19 at 20:51
  • Please edit your question and remove the speculative part. France switches to Euro since 1999 and stops using Franc since 2002. The CFA_franc conversion is mostly legacy remains of the colonisation, no new CFA_franc is issued and has nothing to do with current-day France fiscal and monetary policies. – mootmoot Aug 14 '19 at 14:18
  • 1
    I was curious and read a few news articles in the French media about this topic. I found no evidence at all that France opposes this change, let alone that its financial power would be hurt. Macron said "we can talk about it with our African partners in an open way". The main discussion is about the economic advantages and disadvantages, and the importance of the political symbol. – Erwan Aug 16 '19 at 23:28

What I won't discuss:

I don't intend to write on all potential actions open to France. If you assume that even war is a plausible response, then you could mention an infinite number of other options.

Wrong basic assumption:

Your basic assumption The adoption of a new currency would really hurt France's financial power is wrong. Many people would perceive the disappearance of the CFA Franc as another symbol for the decline of French influence in the so-called Francafrique. However, the direct economic impact would be small, almost negligible. The most tangible benefit for France is the obligation of CFA Franc members to deposit 50 % of their national reserve money in the French treasury. This sounds like a great advantage, but in practice it's of no great importance (BBC article, already cited in a related question):

In December 2017, the central banks of West Africa and Central Africa had €5bn (£4.3bn) and €3.9bn in the French treasury, respectively.

This is a small amount compared with total French public debt, which stood at about €2.2trillion in 2017.

How much does France possibly gain? France pays 0.75 per cent of interest on the deposited money. You can calculate how much more it would have to pay, if it had to obtain the same amount of money by selling sovereign bonds of a certain maturity. At current interest rates - even if the deposits were several times larger - there wouldn't be any reason for France to care, much less to feel threatened by the abolition of the CFA Franc.

Other consequences:

The loss of the peg between Euro (or previously French Franc) and the Franc CFA could still have real economic consequences. If the currency risk increases, this could have a negative impact on trade, investment decisions, savings of African citizens in France or Europe (and theoretically vice-versa). However, if you ignore its closer economic ties to the region, France is as much concerned as any other country in the Euro zone

What France will do:

French diplomats will certainly continue to promote the CFA Franc as guarantor of economic stability (absence of monetary crises, like those in Argentina or Zimbabwe) and raise questions about the prospects of a new currency and its advantages.

Currency pegs never a good thing?

Mainly as a response to a user comment to another proposed answer:

This answer is extremely simplistic in many ways. Importantly, France gave up independent monetary policy a long time ago. It's true that a currency pegged to that of a larger economic area is not a good thing but that's exactly the situation France is now with respect to Germany. The CFA Franc hardly benefits the country and is mostly a symbolic curiosity.

I consider this answer itself extremely simplistic. It's true that a currency pegged to that of a larger economic area is not a good thing is wrong. It may be correct in a specific case, but it's not unquestionably true.

There is a strong incentive for smaller economies to peg their currency to another currency belonging to a larger economy, whether the US Dollar, French Franc (CFA Franc!), Deutsche Mark (e.g., Austria, Bulgaria), Euro or others (see List of circulating fixed exchange rate currencies). Historically, countries had their currency pegged to gold or silver, which was equally outside of control by "monetary policy". Many countries voluntarily maintain their currency pegged to that of other countries, notwithstanding Argentina or other examples. Even now, the CFA Franc member countries don't want to create local, national money - but a new supranational currency outside of their control!

  • It was merely a comment. It might not be unquestionably true but it's generally not a good thing and your exemples do little to suggest otherwise. Indeed it's perfectly true that many countries historically had their currency pegged to gold or silver but that only provides further support to my comment! The history of the gold standard is prima facie evidence for the fact that countries voluntarily adopted economically self-defeating policies, strongly undermining your case... Differences of opinion aside, -1 because that's simply not an answer to the question asked. – Relaxed Aug 18 '19 at 10:01
  • @Relaxed: We won't agree on the meaning of words like true or fact. Let's simply hope that our grandchildren won't consider our post-Bretton-Woods system self-defeating. – user23205 Aug 18 '19 at 21:24

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .