French economy returns to recession

  • 15 May 2013
  • From the section Business
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Media captionA year since Mr Hollande became president, French households are still feeling the pinch as Hugh Schofield reports

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

Its economy shrank by the same amount in the last quarter of 2012.

President Francois Hollande has said he expects zero growth in 2013, lower than a 0.1% growth forecast by the French government.

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

A recession is defined as two consecutive quarters of negative growth.

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.


France has record unemployment, and low business and consumer confidence.

News of the latest recession in France, which is Europe's second-largest economy, 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.

'Negative view'

On Wednesday, President Hollande is meeting 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 on Wednesday 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.

Germany's growth figure of 0.1% in the first quarter was far weaker than expected, with economists having expected a rate of 0.3%.

Annual figures from the country's Statistics Office also show the German economy has shrunk by 1.4% when compared with a year ago.

But in a statement it said this was partly due to severe winter weather: "The German economy is only slowly picking up steam. The extreme winter weather played a role in this weak growth."

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