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Economy

ORIGINAL FRENCH ARTICLE: La France s’installe dans la récession

by Clotilde Mathieu

Recession Takes Hold in France

Translated Friday 3 April 2009, by Claire Scammell

According to INSEE, France’s National Institute for Statistics and Economic Study, a decline in activity will result in the loss of close to 400,000 jobs.

While Christine Lagarde, French Finance Minister and Jean-Claude Trichet, head of the European Central Bank, are promising an upturn in 2010, hoping perhaps to provoke an illusory jolt of confidence, INSEE’s forecasted growth rate is decidedly gloomier for the first half of 2009.

According to the institute’s estimations, France will see a decline in activity of 1.5% in the first quarter, a greater decline than seen in the last quarter of 2008 (-1.2%). A less marked fall of – 0.6% is expected in the second quarter, an improvement linked to the different stimulus plans set up by the US and by the German and English governments. As for the French plan, INSEE estimates that it will mean no more than a 0.1% improvement in GDP in the first quarter of 2009 in France. A laughable amount.

In the end, if growth in the second half were to be zero then the economy would have shrunk by 2.9% this year. At its press conference the institute dismissed “all predictions for what might arise in the second half of the year”, as was heard from Eric Dubois, head of economic research. “We are hoping to see growth in the third quarter but that does not merit commitment or even prediction” he added.

The business climate continues to deteriorate, reaching an all time low. Production is slowing down, commercial investments have frozen; the financial crisis is continuing and creating very difficult lending conditions. As for household consumption, after a surprise recovery in the last quarter of 2008, it should, according to INSEE, nearly stagnate in the first half of 2009. And that’s in spite of a slowing of price increases. Analysis from INSEE sees the French, worried about their future and aware that their purchasing power is going to decrease, adopting cautious behaviour; they are saving more, consuming less and cutting back on spending in terms of property investments. The result, employment is taking a hit.

INSEE estimates that between January and May 386,000 jobs will be lost. This is the amount the government were predicting for the whole year! In the first half of 2009 the industrial sector will wipe out 140,000 jobs, followed by the construction and the temporary-employment sectors who will each take their turn to inflate the unemployment figures. Thus, from June the unemployment rate is due to settle at 8.8% (9.2 % if the overseas departments are included).


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