French unemployment hits 13-year high
Pressure builds on President Francois Hollande as number of unemployed people passes three million threshold.
The number of unemployed people in France has broken past the three million barrier for the first time since 1999, the country’s leaders say.
The latest total adds pressure on President Francois Hollande, whose administration is under attack four months after taking power for not doing enough to fix the economy. France’s unemployment rate is currently 10 per cent.
Breaking the three million mark carries more symbolic importance than economic significance, but the news was covered extensively in the French media over the weekend. The employment ministry says the three million threshold was crossed in 1996 and again in 1999.
Michel Sapin, the country’s employment minister, confirmed the total on French radio on Sunday and warned that the numbers would likely get worse.
Prime Minister Jean-Marc Ayrault called the numbers “very violent”. The government announced last week that it had counted more than 2.9 million unemployed people in July, so the threshold was expected to be passed in August.
As he grapples with rising unemployment and an economic slowdown, Hollande made a politically risky move over the weekend by offering a state lifeline to wind down a small, ailing French mortgage lender.
The government has promised to guarantee Credit Immobilier de France’s debt, putting an end to the bank’s vain search for a buyer after credit rating downgrades drove it into a funding wall.
Unlike Franco-Belgian bank Dexia, which was also rescued with guarantees in the wake of the eurozone debt crisis, CIF is profitable and can be wound down gradually without requiring an injection of taxpayer money, bankers said on Monday.
The bailout risks, however, giving voters the impression that the Socialist president is going soft on the financial sector after promising during his election campaign to crack down on the industry for perceived excessive risk-taking and lavish bonuses.
The daily Le Monde highlighted the irony with a cartoon showing Hollande rescuing a drowning CIF banker while recalling his campaign mantra that “my adversary is the world of finance … but I don’t like seeing people suffer”.
With a mortgage market share of 3.5 per cent and assets of $41.60bn, analysts said CIF’s troubles were easily contained and specific to the bank’s reliance on market funding, rather than the quality of its assets.
Financial market players said France’s sovereign bond yields are unlikely to come under pressure from the debt guarantees, set to cover up to 20 billion euros of CIF debt.
The real risk, however, lies in a likely public backlash against Hollande over the consequences on jobs.
“The market is going to be more understanding than the French people,” said a bond trader who specialises in French institutions. The trader spoke on condition of anonymity.
Credit Immobilier de France’s 2,500 employees and 300 branches are unlikely to survive due to conditions attached to the state guarantees, which are subject to European Union approval, according to SNB bank union leader Regis dos Santos.
“We’re already seeing comments from the public saying that the state is rescuing a French bank … even when the government has not spent a single penny,” dos Santos said. “This is going to impact public opinion.”
He questioned whether regulators and regional authorities in charge of the CIF had put enough pressure on its outgoing chief executive, Claude Sadoun, to change a business model that relied exclusively on market funding and that had taken a hit with every credit-market flare-up since 2008.