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Fri, Aug 14, 2009 - Page 10 News List

France edging out of recession

AFP , PARIS

The French economy sprang a big surprise yesterday, rebounding from recession with 0.3 percent growth in the second quarter, French Finance and Economy Minister Christine Lagarde said on RTL radio.

“After four quarters of negative growth, France is finally coming out of the red,” she said.

Soon afterwards, official data from the national statistics office INSEE showed that this was the case, providing figures showing that the run of quarterly shrinkages had ended.

The sudden switch came as a surprise because INSEE had forecast a 0.6 percent drop and the Bank of France a 0.4 percent contraction for the quarter. The French economy contracted by 1.2 percent in the first quarter.

Meanwhile, Germany’s federal statistics office also announced an unexpected second-quarter GDP rise of 0.3 percent on the first quarter of the year.

Europe’s biggest economy had not seen positive growth since the first quarter of last year and the news gives conservative German Chancellor Angela Merkel a boost with just over six weeks to go until a general election, the satistics office said yesterday.

The growth rate caught analysts by surprise as they had expected a 0.2 percent drop of GDP in the second quarter.

The statistics office said the return to growth was due to “positive momentum from personal and public expenditure as well as the building sector,” following two 81 billion euro (US$115 billion) government stimulus packages.

The announcements were likely to boost hopes of a recovery, although there is still considerable uncertainty about the speed and sustainability of the climb out of the worst financial crisis for about 70 years.

The International Energy Agency warned yesterday that evidence of “green shoots” of recovery was patchy, and in several leading economies, unemployment, a lagging consequence of downturn, is still rising and is expected to do so for some time.

However, the French figures follow other encouraging indicators in recent weeks including a rise in industrial production.

The French and German figures are in contrast to the situation in Britain, the US and Spain which have seen falls in second-quarter GDP.

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