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Hollande in a fix over damaged economy

Tuesday, May 28, 2013 - 01:58

May.28 - French consumer confidence hits an all time low and S&P warns France it may face another credit rating downgrade. As the Bank of France releases its latest economic outlook Ciara Sutton asks how serious the economic crisis is for the euro zone's second largest economy?

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Violent clashes against a government decision to allow same-sex marriage in France. Hundreds of thousands of protesters want the President to resign for allowing the new law. And it's not the only storm testing Francois Hollande's leadership. He's struggling to deliver on promised budget cuts and revive the country's economy. Latest consumer confidence has fallen to a record low. Brenda Kelly is from IG. (SOUNDBITE) (English) BRENDA KELLY, MARKET ANALYST, IG "We will more than likely see a further downgrade by S&P in the coming months perhaps because it doesn't look very likely that under this present government that those structural reforms will come and it's mainly due to the fact that there is little pressure on the debt markets for the time being." S&P forecasts the economy will shrink 0.2 percent this year and grow by 0.6 percent next year - that's half the government's 2014 growth forecast. The European Commission is also expected to criticise France this week for it's lack of action And the Bank of France too has joined the growing chorus over cuts. It wants public spending reined in instead of increasing taxes. Christian Schulz is from Berenberg Bank. (SOUNDBITE) (English) CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG, SAYING: "The mood in France is very bad. Also the PMIs or any other indicator that you could look at is much lower in France than it is even in the crisis countries in the euro zone. However, I think the mood in France is slightly worse than the actual situation. It's more a vote of no confidence in the government's policies than a reflection of the actual economy." Hollande's popularity rating hit an all time low last month. It's improved a little but it's still worse than almost all previous presidents after a year in office. He's been plagued by unemployment, and has joined Germany and Italy to "help rescue" an entire generation who fear they will not find jobs. 1 in 4 young people in the EU are unemployed. But Hollande knows any cuts to France's generous welfare and pension systems - or its rigid labour laws - may prove politically costly.

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Hollande in a fix over damaged economy

Tuesday, May 28, 2013 - 01:58