France slides towards recession
The Bank of France, which had already predicted gross domestic product would shrink 0.1 percent in the third quarter, said on Friday it was now expecting a similar 0.1 percent decline in the last three months of 2012 as well.
Economists said the news showed the Socialist government was being optimistic in forecasting growth of 0.8 percent next year, especially when it also hopes that the biggest post-war budget cutbacks will slash the public deficit to 3.0 percent of GDP, from an estimated 4.5 percent this year.
It's not looking good, said Nicolas Bouzou at economics consultancy Asteres. There's a real inconsistency in the government's policies. They're creating a recession, and the growth-boosting policies will only come in afterwards.
Michel Martinez, an economist at Societe Generale bank, said the government would have to respond to the downturn even if it was likely to be much milder than in spots like Spain or Italy.
It's a political choice, he said. They're going to find themselves with two options. Either they forget about more budget tightening and miss the budget target, which risks damaging France's image with markets, or they correct the budget, he said.
President Francois Hollande's Socialist government forecasts 0.8 percent growth in 2013 after 0.3 percent in 2012, and hopes that 30 billion euros of budget savings - comprising spending