French Economy Returns to Recession

Peugeot workers demonstrate in Paris. The auto firm has recorded huge losses over the last year., a photo by Pan-African News Wire File Photos on Flickr.

French economy returns to recession

WEDNESDAY, 15 MAY 2013 20:53

FRANCE has entered its second recession in four years after the economy shrank by 0.2 per cent in the first quarter of the year, official figures show.

Its economy shrank by the same amount in the last quarter of 2012. A recession is defined as two consecutive quarters of negative growth.

France has record unemployment and low business and consumer confidence.

Separate figures showed that the recession across the 17-nation eurozone has continued into a sixth quarter.

The economy of the 17-nation bloc shrank by 0.2% in the January to March period, according to the EU’s statistics office Eurostat, with nine of its members now in recession.

Germany’s economy, generally considered to be the eurozone’s strongest, grew by just 0.1% in the quarter.

The European Central Bank cut interest rates at its last meeting to a record low of 0.5% in an attempt to stimulate growth.

News of France’s latest recession comes on the first anniversary of Francois Hollande being sworn in as president.

The French unemployment rate is running at 10.6% and is forecast to rise further next year.

Its budget deficit is also expected to remain well above the EU target of 3% of GDP, with the commission estimating it will be 3.9% this year.

But France’s unemployment rate is below the eurozone average, which was 11.4% in 2012 and is expected to hit an average of 12.2% this year. In both Greece and Spain the rate stands at about 27%.

France this week passed a range of measures aimed at stopping the rise in unemployment by reforming the country’s labour laws.

These include measures to make it easier for workers to change jobs and for companies to fire employees.

The French economy has performed better than other eurozone members, including Spain and Italy, but it has not moved as quickly to reform its economy.

One of the new bill’s main measures is to allow companies to cut workers’ salaries or hours temporarily during times of sluggish economic performance, something that is common in Germany.

Yesterday, President Hollande met the European Commission president, Jose Manuel Barroso, and other commissioners in Brussels for talks on boosting eurozone growth, as well as to talk about France’s efforts to reach the EU’s deficit target.

Mr Barroso told French radio yesterday that France had “lost competitiveness in the last 20 years”.

He added that he thought the country sometimes had a “very negative view of the opportunities of the modern world, for example of globalisation”.

France entered its worst recession since World War II in 2009. Although it was thought to have been in recession in 2012, these figures have now been revised to show only one quarter of negative growth.