By Peggy Hollinger in Paris Published: March 2 2009 11:39 | Last updated: March 2 2009 19:38 France is steeling itself for the worst recession of the postwar era as the government prepares to admit the economy will contract by as much as 1.5 per cent this year, against previous official forecasts for growth. Though some ministers have indicated in recent weeks that the economy would go into reverse in 2009, the official forecast to be announced on Wednesday is worse than previously suggested and comes amid a raft of indicators that show the global crisis has finally come home to roost in France. On Monday finance ministry officials confirmed that 300,000 jobs were expected to disappear this year, while surveys showed that industrial output had dropped to a record low in February. The slowdown means France will exceed its own forecasts for this year’s budget deficit, now likely to be more than 5 per cent of gross domestic product, against the unofficial forecast of 4.4 per cent given by Eric Woerth, budget minister, a few weeks ago. Nonetheless, Christine Lagarde, finance minister, retained her relative optimism on Monday, arguing that France was still better able to weather the crisis than its neighbours and the economy would return to growth in 2010. “We are a lot closer to the relaunch than many of our neighbours.” But it is clear the government is deeply concerned over the speed with which the crisis is taking root. Though consumer spending in January was better than expected, monthly unemployment figures recorded their sharpest rise since records began. The far more pessimistic economic outlook is likely to turn up the heat on Nicolas Sarkozy, the president, at a time when his ratings are close to all-time lows. Unions plan a second day of national protest on March 19 over his refusal to boost consumer spending with new tax breaks or wage hikes, while the overseas territories of Guadeloupe and Martinique have been paralysed by a general strike. The government is determined to avoid wider social unrest and has already backed down on some reforms, such as the evaluation and promotion of university researchers last week. Officials said they were hoping for some small sign of recovery that could be used to fend off pressure for a new stimulus package. Much would depend on how tense the social situation became. “If there is any sign of a rebound, they will try to get by,” said one ministry official. “But a lot of people are thinking about [a social clash] a lot. They are wondering how far we can go.” Copyright The Financial Times Limited 2009France braced for worst postwar slump
Tuesday 3 March 2009
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