Economy perks up ahead of Sarkozy mandate

10th May 2007, Comments 0 comments

PARIS, May 10, 2007 (AFP) - French economic prospects showed fresh signs of life on Thursday, with positive industrial and trade trends, as Nicolas Sarkozy prepares to begin a five-year presidential term promising to free up the economy.

PARIS, May 10, 2007 (AFP) - French economic prospects showed fresh signs of life on Thursday, with positive industrial and trade trends, as Nicolas Sarkozy prepares to begin a five-year presidential term promising to free up the economy.

Industrial production edged up 0.2 percent in March from February, when output rose 1.2 percent, official figures showed, while the trade deficit narrowed sharply.

French customs authorities said the shortfall in March came to 1.649 billion euros (2.23 billion dollars) from 2.354 billion euros in February.

Analysts attributed the improved trade picture, which emerged despite strength of the euro, to the robust health of the German economy, a critical French export market.

Thursday's data should cheer Sarkozy as he fine-tunes his economic program before officially assuming the French presidency from Jacques Chirac on May 16.

Sarkozy, a right-wing former interior and finance minister, defeated Socialist Segolene Royal on Sunday on pledges to sweep away structural constraints in the economy, which he says have condemned France to tepid growth and jobless rates that are among the highest in the eurozone.

But in overturning decades of entrenched social welfare entitlements, Sarkozy could face the wrath of workers, civil servants, retirees and trade unions.

"The only question is to know if the new leaders will be able to quickly take the measures that are necessary to restore business confidence without provoking a breakdown in the social climate," commented Marc Toutati of the management consultant group ACDE.

He said that if class struggle and distrust among the key players can be avoided, French economic growth could come to 2.5 percent in 2007 after 2.1 percent in 2006.

Finance Minister Thierry Breton said the economy had outperformed targets in the first two quarters, with government growth projections revised upwards for the period to 2.5-3.0 percent from 2.0-2.5 percent.

Economist Alexander Law on Thursday said "the first quarter was especially encouraging for French industry." Production in the January-March period increased 1.0 percent, its best quarterly showing since late 2004, he said.

The good performance came despite a strike at automaker PSA Peugeot Citroen and an appreciating euro, which in principle should make French exports more expensive and less competitive on world markets.

But he added: "It must be remembered that France is taking advantage of the excellent performance of the European economy, particularly Germany."

While the French and German economies may be competitors, "French industry continues to need the support of its German counterpart."

Mathieu Kaiser of the BNP Paribas bank cautioned that while industrial production prospects remain positive for the second quarter, "the current slowdown in the US economy and the appreciation in the euro since February could slow the pace of exports and depress activity in the third quarter."

Touati of the ACDE also attributed the brighter trade picture to the vigor of the eurozone and German economies.

But he too warned that the strength of the euro, as well as a moderation in eurozone momentum, "will likely limit French exports starting in the summer."


Copyright AFP

Subject: French new

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