Fresh grim indicators put France on hot seat
Updated: 2012-08-21 07:50
A job seeker uses a computer to search for job opportunities in a National Agency for Employment (Pole Emploi) in Nice, southeastern France August 20, 2012. [Photo/Agencies]
PARIS -- Can the Socialists' plan to expand growth and trim budget deficit despite a deteriorating global business climate, be dashed? Could France, Europe's key powerhouse, be the next name in the list of the eurozone's economies mired in recession?
Questions had been risen after fresh data shadowed the 2 trillion euros ($2.46 trillion) economy, ringing the alarming bell of a torrid struggle to quicken domestic growth and lead the battling European bloc to emerge from a spiralling debt crisis.
In its last economic report, French central bank Banque de France expected the country's gross demestic porduct (GDP) to slide by 0.1 percent in the third quarter, attributing it to limp industrial activities and low demand.
It showed industrial business sentiment in July at the weakest level since three years, on tame automotive and textiles businesses while service firms were also gloomy with the sentiment indicator showed the lowest performance since 2009.
"Figures showed that France narrowly avoided a recession in the second quarter, but, lack of growth dynamism pointed to a possible contraction over the next period," Jean-Loius Mourier, economist from Aurel BGC said.
"Domestic demand was very low, household consumption fell and exports were not dynamic showing that the French economy suffers from the crisis and which implies a rapid and active moves of the government if it wants to meet its financial targets this year," he told Xinhua.
Taking power three months ago, the socialist government pledged to combat excessive austerity and improve the management of public finances.
It unveiled additional 7 billion euros in new taxes for this year on large companies and wealthy households, to expand growth by 0.3 percent and reach a deficit target of 4.5 percent of GDP.
The French Court of Auditors, the body in charge of auditing the management of all national public and semi-public administrations and bodies, has said 33 billion euros will be needed to meet a 2013 deficit goal of 3 percent of GDP.
Some even doubt if such promises could be set on ground.
"There is no structural support of France's growth. Households expenditure is expected to deterioarte and exports and investment were extremely fragile," said Nicolas Bouzou, director of Asteres economic researchs bureau.
"Nothing shows we will have somthing positive in the next quarter. This fact adds more pressure on the government which is strained to work harder on taxes and public spending," he added, forecasting a growth rate at 0.2 percent for the whole year of 2012, slight below the government's target.
The weak outlook was underscored by a wide trade gap of 5.99 billion euros in June and a record high of unmeployment rate in nearly 13 years with 2.9 million unemployed people over the same period.
Expecting a rise in joblessness rate on lack of wealth creation, Eric Hyer from the French Observatory of Economic Conditions said the country needs to accelerate growth by 1 percent yearly to absob the growing slice of jobseekers, a fact that remains out of reach.
"We noted that uncertainty has increased steadily. With a zero-growth rate, thousands of jobs will be cut in an already sluggish market," Hyer stressed.
Affirming the challenge of a "too high unemployment," French Prime Minister Jean-Marc Ayrault minimised the risk of recession, betting on the country's "capabilities" to be on the path of growth recovery.
"France is not in recession, while many countries are. Germany is also affected. There are decisions to be taken in each country, but also at the European level. We must strengthen the euro area, restore confidence ... to restart our economy," Ayrault said in a recent interview with French provincial daily Le Dauphine Libere.
After two-week summer vacation, French President Francois Hollande will receive his ministers on Wednesday during a weekly cabinet meeting with on table tricky issues of wane economy, high joblessness, persisent eurozone crisis and soaring fuel prices. (1 euro = $1.232)