The French economy grew by just 0.1% in the first quarter after shrinking in the last three months of 2012. France has had the sharpest fall in business confidence of all European countries in the past six months. Unemployment has reached a 16-year high.
Weak growth – the government’s 2013 0.1% target looks a stretch – has already blown the deficit-reduction plan off course. The overspend will be around 3.7% of GDP this year, whereas the original target was 3%. To make matters worse for President Hollande, a former minister has admitted lying about an illicit Swiss bank account.
What the commentators said
Hollande gave voters “the impression that more taxes on the rich and an end to austerity would be enough to cure France’s ills”, said The Economist. So his “belated conversion” to the spending cuts and welfare and labour reforms, needed to galvanise the French economy and thus work off its high debt load, have left the electorate unconvinced. He has tweaked labour legislation and cut some red tape, but “needs to do more”.
This isn’t just France’s problem, said Hugh Carnegy on FT.com. The eurozone is stuck in recession and could do with a push from its second-biggest economy, so everyone is keeping a close eye on the progress, or lack thereof, that Hollande is making with his reforms. More broadly, France’s struggle is undermining European cohesion.
Hollande’s weakness means that the traditionally pivotal Franco-German alliance is now in “questionable shape”, said Jonathan Fenby in The Guardian. The Germans think France’s reforms are far too slow “and take a dim view of France’s sympathy for critics of austerity in southern Europe”.
At the same time, France’s weakness makes it much harder for it to get the continent to ease up on the austerity that is causing such resentment. So “a two-speed eurozone, divided between northern and southern states becomes more likely”.