France anxious to get back to the grindstone

28th August 2006, Comments 0 comments

FRANCE, Aug 27, 2006 (AFP) - September marks the end of the long summer break in France, but this year the post-holiday blues are expected to be lifted by news that French economy is growing at its fastest pace in years.

FRANCE, Aug 27, 2006 (AFP) - September marks the end of the long summer break in France, but this year the post-holiday blues are expected to be lifted by news that French economy is growing at its fastest pace in years.

While positive economic data boosted the centre-right government of Prime Minister Dominique de Villepin in August, it now faces the tricky task of pushing through a controversial merger involving state-owned Gaz de France.

The beginning of September is "la rentrée" in France, the return to work after a month-long shutdown when many factories and shops close their doors and politicians jet off for breaks.

Economic growth and the GDF merger, as well as budgetary negotiations for 2007, are likely to be the dominant political and business issues as the country springs back to life.

Data in August showed that the French economy grew by 1.2 percent in the second quarter of the year compared with the first, its fastest rate of expansion since 2000.

Economy and Finance Minister Thierry Breton has boasted that France is now "the model economics pupil in Europe", pointing to falling unemployment, job creation, improved industrial activity and solid consumer spending.

He reiterated last week that the economy would grow by between 2 and 2.5 percent this year.

The faster pace of the economy should help to generate higher tax revenue — a three-billion-euro increase, according to Budget Minister Jean-François Copé — and help the government with its budgetary considerations and spending plan for 2007.

The budget for next year, considered an important one because of the presidential elections scheduled for the year, is to be presented to the cabinet of Prime Minister Dominique de Villepin's government during the week of September 20-27.

While strong growth is positive news for the government, which has put lowering unemployment and improving public finances at the heart of its agenda, there is already debate about whether the rate of expansion can be sustained.

Economists say that higher interest rates in the eurozone, a slowing US economy and tax hikes in Germany next year are likely to take some of the steam out of recovery in France and other European economies towards the end of this year and in 2007.

The government will also have to face down critics of its proposal to merge state-controlled Gaz de France with fellow French energy group Suez.

The plan, seen as a way of blocking a possible takeover bid for Suez by Italian group Enel, will involve a merger that will lead to the part-privatisation of GDF.

The state-owned holding in GDF would fall from 80 percent to 34 percent, a proposition which has come under fire from left-wing opponents and, more significantly, from many inside the government's own UMP party.

A bill is to be presented to parliament on September 7 and Finance Minister Breton has worked throughout the summer to convince his colleagues in the UMP party to back the government.

The opposition Socialist party has proposed a record 30,000 amendments to the bill, but Breton insisted last week that the UMP party was united behind the government.

Breton and his counterparts in government have insisted that the merger of GDF and Suez is essential to safeguard French interests in the energy sector by creating a company capable of competing on international markets.

Prime Minister Villepin, who was weakened earlier this year by large-scale protests about a planned labour market reform, has returned from his holidays in the south of France with three priorities for the remainder of the year, his office said last week.

He plans to focus on lowering unemployment, offering solutions to the problem of high petrol prices and providing help to students and their parents.

Villepin has pledged to lower the number of jobless people in France to two million by 2007. In June, the number of unemployed stood at 2,186,000.

Copyright AFP

Subject: French news

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