France hit by record deficit, soaring job losses
A revised state budget forecast says France is set to lose 350,000 private sector jobs while public deficit will continue to soar to 5.6 percent of gross domestic product in 2009.PARIS – France will lose more than a third of a million private sector jobs this year and see its public deficit soar to record levels, the government forecast Wednesday in a revised state budget.
President Nicolas Sarkozy has responded to the economic crisis with a huge spending programme, but the stimulus has so far failed to stem job losses while breaching European Union deficit rules designed to protect the euro.
France's public deficit is expected to soar to 5.6 percent of gross domestic product this year and will remain at 5.2 percent in 2010, according to the revised state budget forecast released Wednesday.
Alongside this, the document predicted that 350,000 private sector workers would lose their jobs in France this year, pushing the number of those out of work to 2.5 million, or close to 10 percent of the workforce.
An earlier budget adopted in December had already predicted the deficit would climb to 3.9 percent of output in 2009, breaching the EU stability pact's three-percent limit, due to extra stimulus spending and tax revenues.
The European Commission has warned it may take action to punish France and other states who continue to breach the deficit ceiling, but the new budget admitted the deficit will remain above the three percent barrier until 2012.
December's budget was based on the assumption of a state deficit of EUR 52 billion, but the revised text presented to ministers on Wednesday said this would rise to the record level of EUR 103.8 billion.
The public deficit covers the state budget, as well as local government and welfare budgets.
"No stimulus plan will allow us to avoid the crisis," Prime Minister Francois Fillon said on Tuesday. "No one can know when we will get out of it. What we do know is that the whole of 2009 will be a year of crisis."
The prime minister also predicted the French economy would contract by between one and 1.5 percent this year, although international experts have predicted a figure of closer to 1.9 percent.
French unemployment soared by 90,200 in January, the highest one-month leap since records began, as the global financial storm triggered by the US credit crisis hit manufacturing and consumer demand.
The crisis is now spreading throughout the economy, despite Sarkozy's announcement of EUR 28.6 billion in stimulus measures, mainly targeted at industries such a motor manufacturing.
France was slower than some of its neighbours to fall into a technical recession, defined as two successive quarters of negative growth, but the government now admits that this is inevitable.
Meanwhile, the mounting crisis has triggered protests from workers.
The French Caribbean islands of Guadeloupe and Martinique have been paralysed by general strikes for several weeks and on the mainland trade unions have called for a national one-day stoppage on 19 March.
AFP / Expatica