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News Analysis: Will President Hollande bring French economy back on track?

English.news.cn   2014-05-17 07:33:51

PARIS, May 16 (Xinhua) -- With eye on discontent voters, French President Francois Hollande said to mark his third year of governing with "an economic turnaround."

With a multi-year deficit cut plan and a reform pact, Hollande wanted to defend his economic credentials and stood firm to defy grim outlooks that set France to miss its financial targets this year.

In a recent interview with the weekly paper Le Journal de Dimanche (JDD), the Socialist head of state announced a second phase of his term during which "the reform effort is not over yet, but the economic recovery is arriving."

"This phase will lead to stronger growth, better competitiveness and a redistribution of purchasing power via lower taxes," he added.

But economic analysts speculate about whether President Hollande, whose popularity at record low due to economic troubles, would be up to go out of the bottleneck without breaking the bottle?

In order to reach its goal of lowering the budget gap to 3 percent of national output in 2015, Hollande pressed for a 50-billion-euro (68.48-billion- U.S. dollar) package of savings by freezing pensions and welfare benefits for a year and keeps most civil service pay frozen until 2017.

In a torrid battle to reverse the alarming unemployment rate, he proposed 30-billion-euro cut in payroll tax to encourage recruitment and investment.

However, economists are sceptical as to whether the government will devote on its pledge to quicken growth by 1 percent this year after fresh economic data showed that recovery was not arriving.

In a report released on Thursday, the national statistics institute, Insee said growth in one of Europe's main powerhouse, stagnated during the first quarter of the year as households' consumption and investment, the economy growth engines, declined over the period.

Official data also showed that consumer confidence dropped in April on rising pessimism about econimic and financial outlook and growing woes over joblessness.

"Optimism is good but realism is better... It is essential to understand that in order to forecast an acceleration of economic activity, we need concrete facts, such as a weaker currency, a more accommodative fiscal policy and investment recovery," said Marc Touati, director of ACDEFI financial analysis bureau.

"We must not forget that before creating jobs, companies need at least six to nine months of sustained activity, which means a growth rate between 1 percent to 2 percent ..." he added in a note.

In a sign that the end of gloom is not in sight, the European Commission set French 2015 budget gap at 3.4 percent, recommending swift policy adjustments to respect its financial obligations.

The Commissison also forecast growth at 1.5 percent, below the government's target of 1.5 percent.

"Overall the euro area is going better and this can have positive impact on French economy but there is not a turnaround or a rebound in growth able to reduce unemployment," said Bertrand Martinot, an economist.

Already struggling to water down worries, the government stick to cut budget gap to 3 percent and to accelerate its gross domestic product (GDP) enough to asbsorb millions of job demands.

"The government reaffirms its determination to ... make 50 billion euros worth of savings to bring the deficit to 3 percent of GDP in 2015 and bring the pace of public spending growth in line with inflation," Finance Minister Michel Sapin said.

"Growth picked up slightly at the end of the year. This year, it will be higher than zero of course, but it will be insufficient. It must be accelerated," Sapin told the local broadcaster Europe1.

Editor: Fu Peng
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