Country Report France May 2009

Summary

The global economic and financial crisis has dramatically changed the political and economic environment facing the French president, Nicolas Sarkozy, who was elected for a five-year term in May 2007.
The financial crisis means that there are considerable risks attached to the Economist Intelligence Unit's forecastsa more severe recession and greater political instability are possible.
The government's short-term priorities will be to alleviate the effects of an economic downturn through measures to support business investment, employment and the incomes of unemployed and low-paid workers.
Mr Sarkozy will continue to try to implement some structural reforms, but he is likely to choose his battles carefully, postponing any changes that risk provoking societal opposition.
The budget deficit is expected to rise above 7% of GDP during the outlook period as a result of below-trend growth. France will avoid facing any financial penalties under the EU's Stability and Growth Pact.
Real GDP is expected to shrink by a revised 3.5% in 2009the first full-year contraction since 1993. Although a gradual recovery will take hold from 2010, annual growth will remain negative.

Mr Sarkozy marked his first two years in office in early May with opinion polls suggesting fairly widespread dissatisfaction with his achievements. The president still enjoys the majority support of centre-right voters.
All eight main trade unions joined May Day rallies to press for action to curb rising unemployment and further demonstrations are planned. Protests by academics against government reforms are severely disrupting universities.
With the risk of unrest on Frances streets rising, a spate of "boss-nappings" has sparked a debate over the limits of legitimate protest.
In view of the sharp rise in unemployment in recent months, particularly among young adults, Mr Sarkozy unveiled an "emergency plan" to help 700,000 young people to find employment during the period up to mid-2010.
Registered unemployment rose by 63,000 people in March, to 2,448,000. This represented an increase of 22.1% year on year. Younger workers have born the brunt of the deterioration in the labour market.
The slide in business confidence may have reached a trough as the outlook for future production improves. Bankruptcies increased by 21% year on year during January-March. Consumer spending was stable at the start of 2009.

This report covers the following industry codes:
SIC Code: 47;60
NAICS Code: 48;52