French economy stalls as fiscal belt tightens | Business| Economy and finance news from a German perspective | DW | 10.04.2012
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French economy stalls as fiscal belt tightens

France's economy has failed to grow in the first quarter of 2012 after President Nicolas Sarkozy made cutting the budget deficit his top priority. Signs of a strong recovery are nowhere in sight.

Europe's second biggest economy remained "sluggish" in the past three months, posting "no growth," a Bank of France survey published Tuesday said.

However, unlike most eurozone economies, France grew 0.2 percent in the final quarter of 2011, thus "avoiding a recession," the bank's monthly report said.

In addition, the Bank of France said that business confidence was unchanged in March, with the bank's industrial sentiment indicator remaining at 95 points – a three-month low already reached in February.

"Forecasts suggest that economic activity will remain stable in the short-term," the bank's report said.

Economists said that the data would underscore perceptions that the French economy was in the doldrums.

Austerity bites

According to a report published by the Organization for Economic Cooperation and Development (OECD), economic activity in France would remain "flat" in the months ahead.

As for the European Union, "signs of a positive economic development" were only seen in Germany and Great Britain, the Paris-based organization added.

"We will need to see stronger signs in terms of business sentiment, demand and competitiveness before we can expect a clear upswing," Fabrice Montagne, an economist at Barclays Capital told Reuters news agency.

Describing the figures as "disappointing," Michel Martinez – economist at Societe General – told the same news agency that recovery would remain "weak," reaching just 0.5 percent for the whole year.

"You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time," he said.

President Nicolas Sarkozy is eager to cut France's spiraling public debt and reduced the public deficit to 5.2 percent of GDP last year. He aims to reach a balanced budget by 2016.

uhe/bk (Reuters, AFP)