France in recession, economy shrinking
03 Oct 2008
Mumbai: The French economy has entered a recessionary phase after its gross domestic product shrank by 0.3 per cent in the second quarter and by an estimated 0.1 per cent in the third and fourth quarters of 2008, the National Institute for Statistics and Economic Studies (INSEE) said in a report.
Technically, recession is expected to set in when the economy contracts in two successive quarters.
French finance minister Christine Lagarde merely said he considers ''the risk of negative growth in autumn for the second quarter in a row as real.''
''Yes, the recession is here,'' opposition Socialist Party leader Francois Hollande told the daily Le Parisien.
"This means the decisions, especially tax choices, made by Nicolas Sarkozy on the day after the presidential election have been revealed as inappropriate, ineffective and unfair and have amplified the shock of the global situation. His policy has failed,'' Hollande said.
French unemployment rose to a 15-year high at over 40,000 in August and INSEE now expects the unemployment rate to rise to 7.4 per cent in the third quarter from 7.2.
If the INSEE forecast is correct, France could be the second member of the eurozone to confirm a recession after Ireland.
The decline comes amidst the financial meltdown and a general economic slump that followed a surge in energy prices.
The European Commission expects Germany, the UK and Spain also to see recession this year, raising the spectre of rising unemployment and business failures across the continent.
Europe's economy shrank in the second quarter, prompted by a second-quarter contraction of Europe's two biggest economies - Germany and France - as well as a fall in Italy, the first time since the launch of the 15-nation euro nearly a decade ago. Gross domestic product fell by 0.2 per cent in the eurozone.
On Thursday, the French government announced plans to buy up to 30,000 homes to boost the housing market and release 22 billion euros in business loans.
French prime minister Francois Fillon said the world stood on the ''edge of the abyss'', gripped by a global financial crisis now threatening industry, trade and jobs worldwide.
European leaders are pinning hopes on the US Congress approving a 700-billion-dollar bail-out for its own banks and those of Europe.
