French Economy Heading for Recession: Bank of France

France’s central bank has announced that the second-largest economy in the euro zone is heading for a recession at the end of the current year.

 

(PressTV) The Bank of France said on Friday that it was expecting the gross domestic product to shrink by 0.1 percent in the last three months of 2012, resembling the 0.1-percent dip in the third quarter, Reuters reported.

The forecast would be the second consecutive quarter of negative growth, and could make it harder for the French government to hit next year’s debt reduction targets.

The latest estimates have also put France on a dismal foothold for the beginning of 2013.

Economists say this is while French President Francois Hollande’s Socialist government was being optimistic in predicting a 0.3 percent growth this year, and a 0.8 percent in 2013.

“It’s not looking good. There’s a real inconsistency in the government’s policies. They’re creating a recession, and the growth-boosting policies will only come in afterwards,” Nicolas Bouzou from economics consultancy Asteres said.

Michel Martinez, an economist at Societe Generale bank, said the French government would face a recession; however, it would not be as deep as what reported in Spain or Italy.

“It’s a political choice. They’re going to find themselves with two options. Either they forget about more budget tightening and miss the budget target, which risks damaging France’s image with markets, or they correct the budget,” he said.

The French government hopes that 30 billion euros of budget savings – comprising 10 billion-euro worth spending cuts and 20 billion euros of tax break – will allow the government to meet its European commitments on deficit reduction.

Last week, the European Commission reduced its predictions for France, saying it is counting on the French economy growing by 0.2 percent and 0.4 percent respectively in 2012 and 2013.

MP/PKH

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