Economy figures deal new blow to Hollande

The latest figures on the French economy were released on Thursday and they dealt a further blow to beleagured President François Hollande. The country's finance minister however was quick to play down the significance of the data.

Economy figures deal new blow to Hollande
Latest figures released on Thursday show France's economy contracted in the third quater of 2013, which spells bad news for the Finance Ministry (above). Photo: AFP

France's economy contracted by 0.1 percent in third quarter due to weakened exports and lagging business investment, official data showed on Thursday, dealing a further blow to unpopular Socialist President Francois Hollande.

The drop comes after the economy grew by an unexpected 0.5 percent during the second quarter, pulling the eurozone's second-largest economy out of a shallow recession.

The contraction for July to September stemmed from a 0.6 percent drop in business investment and a 1.5 percent slide in exports, said the national statistics agency INSEE.

The Socialist government, struggling with rising job losses and a mounting deficit, was quick to dismiss the bad news.

"This is not a recession, it is not an indication of decline," Finance Minister Pierre Moscovici told French radio moments after the figures were released.

The figures come a day after a European Commission report found that Germany and 15 other member states – including France and non-euro Britain – had "imbalances" on a range of indicators from debt to trade which need attention before they become serious problems.

Struggling France, faced with very slow growth, high debt and a high tax regime was put on notice with Italy and Hungary to take "decisive policy action" between now and May, when the findings will be reviewed.

The Commission found them at fault in areas ranging from debt to pensions planning.

Mindful of the sensitivity of taking member states to task over economic policy, Barroso insisted "it is is not about the EU running economies in place of national governments."

Rather it is about opening a new phase of "bolder" cross-border action to produce growth and jobs, "ensuring that what is good for individual states is good also for the EU."

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UK economy leapfrogs France, new study claims

There was more bad news for France on the economic front on Wednesday as another study claimed that the British economy was currently in the process of overtaking the French as Europe’s second largest.

UK economy leapfrogs France, new study claims
Ouch. France overtaken by the UK as the world's 5th economic power. Photo: Oli Bac/Flickr

While the jury is still out, the evidence is growing to suggest the UK economy is currently in the process of overtaking France’s.

The latest think tank to produce a study with that conclusion is the UK’s National Institute of Economic and Social Research (NIESR), which believes France will grow at just 1.3 percent this year compared to the UK’s growth rate of 2.5 percent.

Simon Kirby, principle research fellow at NIESR, said Britain was expected to overtake France both in terms of purchasing power parity (PPP) – which adjusts for living costs – and at market exchange rates.

“When you compare the two economies, it’s really been a story over the past few years of a relatively subdued domestic economy in France, with a lacklustre housing market, consistent falls in housing investment and most of all subdued consumer spending,” said Mr Kirby.

“An elevated unemployment rate of 10pc, as well as general uncertainty within the monetary union has also been an important factor.”

The study is not the first to show a symbolic shift in Europe’s economic league table. In January, figures from the European Commission’s website revealed that France’s GDP was less than the UK's over 2014.

Newspaper Le Figaro reported that France's GDP, that is, the wealth created by the country, was estimated at €2,134 billion, while the UK’s was quoted as €2,232 billion.

Christophe Blot from the French Economic Observatory in Paris said at the time that such league tables were of little importance.
"It’s not really a surprise that the UK is above France given the problems the French economy has faced, such as record unemployment and a lack of growth," he told The Local.
"Of course the data will be used by politicians and the French bashers and it is a blow to morale but it doesn’t really matter. We are all aware of the problems in France over the last few years but the question is how can we boost growth in the French economy? That’s all that matters.”