Government pulls happy financial news out of hat

31st March 2006, Comments 0 comments

PARIS, March 31, 2006 (AFP) - French unemployment is falling, growth is rising and overspending is finally under control, the finance minister said Friday hours before President Jacques Chirac was to address the nation on a crisis over jobs for young people.

PARIS, March 31, 2006 (AFP) - French unemployment is falling, growth is rising and overspending is finally under control, the finance minister said Friday hours before President Jacques Chirac was to address the nation on a crisis over jobs for young people.

On the hot issue of unemployment, which has led to weeks of sometimes violent protests, Thierry Breton predicted that 200,000 jobs would be created and that the jobless rate would drop below 9 percent by the end of the year.

"This very favourable evolution stems of course from growth but also from the results of the measures taken by Prime Minister Dominique de Villepin in favour of employment and notably the CNE and the social cohesion plan," he told a press conference.

The CNE, or New Employment Contract, came into effect last year for small companies, and was a prototype for the CPE, or First Employment Contract, which has sparked the current social unrest.

Official data published earlier on Friday showed that the jobless rate had fallen by 0.4 percent in February, after a rise of 0.7 percent in January, but that it still stood at 9.6 percent.

The latest figures are likely to be interpreted as offering the centre-right government some encouragement in pursuing its employment policies despite widespread public hostility.

The plan by the prime minister to get more young people into jobs has turned into one of the worst crises in Chirac's 11-year presidency — sparking a protest movement that on Tuesday brought more than a million people onto the streets.

Chirac was to make a long-awaited address to the nation on the disputed youth jobs contract later on Friday, amid predictions that he would stand by his prime minister and sign the measure into law.

The CPE, an open-ended contract that can be terminated without explanation during a two-year trial period, is designed to bring down France's high youth unemployment rate by making it less risky for employers to take on young staff.

But opponents say it is a step back from France's hard-won system of social protection and a move toward what they see as the cut-throat labour policies that prevail in Britain and the United States.

Breton said Friday that the weeks of demonstrations and strikes sparked by the CPE had not had any effect on the economy so far.

He told the press conference that the French economy was on course for lasting growth of 2-2.5 percent per year from 2006.

"Our economy has solidly entered a growth regime," he said.

Earlier Friday, official data estimated that the French economy grew by 1.4 percent in 2005, confirming an earlier estimate but raising growth in the last quarter to 0.4 percent from 0.2 percent.

Breton also announced that France had finally cut overspending to within EU limits last year, after years of excessive deficits.

"After several years, France has returned within the limits of the Treaty of Maastricht as it had undertaken to do," he said.

The public deficit was at 2.87 percent of output in 2006 and was set for 2.8 percent this year, within the EU ceiling of three percent, said Breton.

The INSEE national statistics institute had reported earlier on Friday however that that the public debt had risen to 66.8 percent of output from 64.4 percent in 2004.

The European Commission reacted to the data by saying it was a "worrying" development.

A sensitive issue in public finances in France is the size of the civil service and the question of reducing it as the post-war generation retires.

On Friday Breton said the large staff at his ministry would continue to be reduced this year. About 2,600 posts are set to be cut there in 2006.

Chirac's rare address to the nation was due to be carried live on all the main French television channels at 8pm. The last time he made a similar speech was during the riots in France's high-immigration suburbs last November.

European Central Bank president Jean-Claude Trichet, in Paris to attend a seminar, said on Friday that European labour policies lacked flexibility and that structural reforms were needed to encourage growth.

"I mentioned as a key issue in Europe, the necessary elevation of the growth potential which supposes that there is very active implementation of structural reforms," he said.

The potential of an economy is a measure of its efficiency and capacity to grow without generating inflation because of bottlenecks.

Copyright AFP

Subject: French news

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