Recession ‘real risk’ for France

Posted by admin on 5 October, 2008 under Business news | Be the First to Comment

France’s economy risks shrinking for the second quarter in a row, according to the finance minister Christine Lagarde.

There was a ‘real risk’ of negative growth this autumn, she said. The economy has already contracted by 0.3% in the second quarter of 2008.

If that were to happen, it would meet the usual definition of a recession – two quarters of negative growth.

However the minister deliberately avoided using the word ‘recession’.

In a statement Ms Lagarde said: “The risk of negative growth in autumn for the second consecutive quarter is now real.”

Recession arguments

Her comments came as France’s national statistics bureau, INSEE, said it expected the economy to shrink by 0.1% in the third and fourth quarters of the year.

“We have slowing growth – I will not use any word other than that.” Jean-Claude Trichet ECB president

President Nicolas Sarkozy acknowledged last week the French economy was in recession – but other politicians have shied away from the term.

The head of forecasting at INSEE, Eric Dubois, said it may be premature to use the word recession.

“The term that we are using is growth which is coming to a halt. Saying that there isn’t any growth already seems like a strong enough message to us,” he said.

Significant risks

INSEE’s projections have sparked a debate over the definition of recession.

The head of the European Central Bank, Jean-Claude Trichet, declined to label France and the eurozone’s economic slowdown a recession.

“ECB experts tell us we have slowing growth. I will not use any word other than that – slowing growth with significant risks growth may become even weaker.”

Government officials insist France is not in a true recession because overall growth for 2008 is still expected to be positive – just under 1%.

A European financial summit to discuss the crisis is due to take place in Paris on Saturday.

News reported by The BBC