French PM balks at recession fears
Prime Minister Francois Fillon on Monday dismissed fears of recession and said there was no need for a stimulus package to keep the economy growing.19 August 2008
PARIS - Prime Minister Francois Fillon on Monday dismissed fears of a looming recession in France and said there was no need for a stimulus package to keep the economy growing.
Fillon held a special meeting of six key ministers to consider action after new figures showed a sharp drop in French economic growth in the second quarter.
"It is not fair to talk about a recession," Fillon told a news conference following the meeting, adding he was confident France would register positive growth in 2008.
"We do not need a stimulus plan which would be an artificial plan," he said.
Instead, France needs structural reform to be better equipped to confront pressures from the volatile global economy, he said.
The prime minister called for a Europe-wide "coordinated response" to international economic turmoil and suggested this could be discussed at a meeting of EU finance ministers in Nice on 12 and 13 September.
"We have a common economic space, a common currency," which makes coordination "indispensable," said Fillon.
For the first time since 2002, France's gross domestic product (GDP) contracted, by 0.3 percent, in the second quarter, prompting Fillon to summon ministers ahead of a full cabinet meeting on Thursday.
Economists say France will be in a full-blown recession if the growth figures continue to drop in the third quarter.
Economics Minister Christine Lagarde, Trade Minister Anne-Marie Idrac and four other key government members met Fillon to analyse the causes of the slowdown and identify responses, a statement from the prime minister's office said earlier.
The Bank of France meanwhile forecast growth for the third quarter at just 0.1 percent.
The government was hoping to achieve growth of between 1.7 percent and 2.0 percent in 2008, despite criticism from economists who say the actual outcome will likely be closer to 1.0 percent.
Fillon said the government would revise its growth forecast when it submits its 2009 budget in the coming weeks but that it would stick to the goal of keeping the public deficit at 2.5 percent of GDP in 2008.
The Socialist opposition has called on President Nicolas Sarkozy to go back on billions of euros in tax breaks that were doled out in a fiscal stimulus package adopted soon after his election in May 2007.
"We are not in a recession but we are feeling the effects of a brutal, difficult crisis", said Socialist Didier Migaud, chairman of the parliamentary finance committee.
"The problem is that we have extremely limited room to manoeuvre because we have wasted quite a bit over the past year. So maybe we should have the courage to put the fiscal package back on the table," Migaud said on France Inter radio.
Consumer Affairs Minister Luc Chatel separately said the government was committed to reform despite the disappointing growth figures.
"This is one more reason to enact reform," said Chatel.
While the government wants to cut spending, it will not opt for tough austerity measures because "this would asphyxiate the economy at a time when it frankly doesn't need this," he said.
The INSEE statistics office on Thursday said output had recoiled under global pressures in the second quarter, contracting by 0.3 percent.
INSEE had previously forecast that the economy would grow 0.2 percent in the second quarter.
[AFP / Expatica]