By: DailyForex.com
The French economy is the second largest within the Eurozone. It’s President, Francois Hollande, came to power in May 2012 with a pledge to solve the nation’s economic problems without the austerity measures adopted by outgoing President Nicolas Sarkozy. A year later, France is struggling with an unemployment rate of 10.8% which is the worst level that the nation has experienced in 15 years. France faces the same problems as much of the rest of Europe with low demand and on-going concerns about sovereign debt hampering growth and job creation. The economy returned to recession at the end of Q1 2013 when it contracted by 0.2%.
President Hollande is predicting that the French economy will stagnate in 2013, but the IMF anticipates that it will contract by 0.2%. France is in the process of reforming its labour laws to promote greater flexibility – a recently passed measure allows firms to temporarily reduce worker’s hours or pay in times of economic difficulty; a facility common in Germany. It also intends to make it easier for employers to sack people and for employees to change their jobs.
The IMF has urged France to do more to reduce its labour costs and refrain from further tax rises in order to boost growth and the nation’s competitiveness.
France’s deficit continues to be above the EU target value of 3% and the EC predicts that it will come in at 3.9% this year. France was granted an additional two years to return its deficit to below the target level.
Something like three quarters of all jobs in Europe are created by SMEs (small to medium enterprises) and there is speculation that the ECB may announce measures to improve lending to them in a bid to boost growth and job creation across the Eurozone. Despite numerous incentives to boost bank liquidity and pump money into the economy, it is still widely believed that SMEs are still being starved of the funding they need to expand.