Paris seeks to ease impact of slipping economy

18th August 2008, Comments 0 comments

France is examining economic measures to stimulate its economy, following its first quarterly decline since 2002.

18 August 2008

PARIS - France is examining economic measures to stimulate its economy, following its first quarterly decline since 2002. A subsidy for peoples' travel costs has been agreed in principle, a government spokesman said in Le Figaro on Monday.

Economy Minister Christine Lagarde is due to meet later on Monday with Prime Minister Francois Fillon to discuss the details of the subsidy.

French commuters have felt their real incomes slip as transportation costs have soared.

However, Budget Minister Eric Woerth said that "we must keep our cool ... making hasty long term funding measures would do nothing but worsen the public finances."

In the second quarter of 2008, the eurozone economy shrunk for the first time since the introduction of the currency in 1999. French GDP was 0.3 percent down on the previous quarter. Paris has blamed the global credit crisis and the advance of commodity prices.

Woerth estimated that the tax deficit, which he attributed to general economic weakness, would be in the region of EUR three billion.

The opposition lashed the government for giving away the country's economic room for manoeuver through tax cuts for the rich - pledged during the election campaign of 2007. The state will lose EUR 12.5 billion this year as a result.

The French government, in basing its 2008 budget on a projected economic growth of 2.25 percent, sees its salvation in and liberalisation of the labour market and healthcare reform.

President Nicholas Sarkozy said during his trip to Russia last week that he would continue with the reforms even with zero growth.

Minister Lagarde said that she expects an improvement in the economy by the fourth quarter, when "the full effect of many structural reforms will be felt."

[dpa / Expatica]

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