French economy sees zero growth in Q2

AP News
Posted: Aug 14, 2012 4:54 AM
French economy sees zero growth in Q2

PARIS (AP) — France's economy was stagnant in the second quarter, the government said Tuesday, amid worries that Europe's No. 2 economy is hovering on the edge of a new recession.

The preliminary estimates released Tuesday by the state statistics agency Insee mark the third straight quarter without growth.

The figures were in line with Insee's earlier forecast for no growth in domestic product for the quarter. But they were better than estimates by France's central bank, which had forecast a 0.1 percent contraction in the second quarter and a continued drop in the third quarter.

Finance Minister Pierre Moscovici expressed hope for growth in the second half of the year despite the lackluster first half. Speaking on Europe-1 radio, he acknowledged that the economy is "too weak" but stressed that France is staying stable even as "most of its partners" are in recession, including Spain, Italy and Britain.

The number of jobs in France and consumer spending both shrank in the second quarter, Insee said. Imports grew more than exports, exacerbating concerns about France's growing trade deficit.

While the lack of economic contraction is a relief for France's government, the lack of growth is a challenge for French President Francois Hollande, marking his first 100 days in office Tuesday. The Socialist government is focusing on raising taxes on the rich and big business to try to cut the deficit, but some economists and business owners warn this will stifle growth when the country needs it badly.