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France slides into recession as exports fall

Figures blamed on weak exports, investment and household spending as Germany also posts unexpectedly weak start to year.

Last Modified: 15 May 2013 11:36
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The number of unemployed people in France hit an all-time high in March [AFP]

France has entered a shallow recession in the first quarter of the year as the economy contracted by 0.2 percent, as figures from Germany also showed that it had got off to an unexpectedly weak start to the year with a marginal growth of just 0.1 percent.

The data from the INSEE (National Institute of Statistics and Economic Studies) statistics agency, released on Wednesday, marks France's first recession in four years.

The gross domestic product (GDP) contracted because of weak exports, investment and household spending, after shrinking the same amount in the last quarter of 2012.

Two consecutive quarters of contracting GDP are indicative of an economy in recession.

The announcement comes after the number of jobless people hit an all-time high in March.

French growth has faltered with increasing unemployment undermining the confidence of both consumers and businesses, which are struggling to cope with government belt-tightening.

Credible programme

European Commission President Jose Manuel Barroso said that Paris needed to present a credible programme of structural reforms after the commission offered France two extra years to bring its public deficit in line with an EU limit of three percent of GDP.

Barroso is due to meet French President Francois Hollande in Brussels later on Wednesday.

INSEE said investment contracted 0.9 percent in the first quarter, with business investment down 0.8 percent, while exports contracted for the second quarter in a row, shrinking by 0.5 percent.

Household consumption dropped by 0.1 percent, contracting for the first time since the second quarter of last year despite higher spending on energy due to a particularly cold winter.

Most private sector economists say the economy would be lucky to grow 0.1 percent this year, as Hollande's government forecast last month that it would.

Official data also published on Wednesday showed Germany, Europe's biggest economy, had been battling freezing winter weather, sagging exports and weak investment.

Germany's GDP grew by an anaemic 0.1 percent in the period from January to March, following a brief and sharp contraction of 0.7 percent in the fourth quarter, the federal statistics office Destatis calculated in a preliminary estimate. 

The number fell short of analysts' expectations for slightly stronger growth of 0.3 percent in the first quarter.

Al Jazeera's Nick Spicer, reporting from Berlin, said the situation in Germany is just slightly better than France. He said the recent deal for wage increases for IG Metall, the metal workers union, could be the silver lining as it might encourage more spending among the workers, which in turn can benefit the economy. 

Our correspondent added the latest economic split between France and Germany is reflective of the political differences between the two countries in terms of austerity measures, which Hollande adopted. 

But he said Germany did not grow enough to stop the eurozone from sinking into the longest recession since records began in 1995. Our correspondent said that growth is only expected to return to Europe in 2014.

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Source:
Al Jazeera and agencies
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