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France struggles to keep up with EU partners

Thursday, January 02, 2014 - 02:22

Jan.02 - European manufacturing is growing at its fastest rate in two and half years, according to the latest data, but France's industrial sector is lagging at a six-month low. On top of that, a new wealth tax has infuriated business leaders, and unemployment is on the rise again. Ciara Sutton asks whether France is heading for a better, or a worse, 2014.

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Setting the stage for a solid start to the year - data reveals manufacturing in the euro zone grew at its fastest for nearly three years in December after good business in Germany and Italy. The key indicator from research firm Markit rose to 52.7 - its best reading in 31 months - readings above 50 indicate growth. But it's not such a rosy picture in France. Manufacturing in the bloc's second largest economy hit 47.0 - a six-month low - clouding the prospect of recovery in the long-suffering sector. Unemployment in France remains stuck at around 11 percent. President Francois Hollande - whose popularity ratings are at an all-time low - argues it has now hit a peak and is set on a downward curve. Speaking during his new year address, he said he wants to create a deal with companies to tackle the joblessness problem. (SOUNDBITE) (French) FRENCH PRESIDENT FRANCOIS HOLLANDE SAYING: "In 2014, we'll need an effort from everybody to win this fight. This is why I offer a 'responsibility pact' to companies. It is based on a simple principle: lower labour charges and fewer restrictions on their activity in return for more job hires and more dialogue with trade unions." Bucking the trend though, French car sales jumped 9.4 percent in December, boosting hopes of a return to growth after four straight years of decline in sales. In an attempt to help drag the economy away from recession, a green light has also been given to the government's controversial 'millionaire tax', to be levied on companies that pay salaries of more than 1 million euros a year. NAB's Tom Vosa isn't convinced by the new law - and says the outlook is at best mixed. (SOUNDBITE) (English) HEAD OF MARKET ECONOMICS AT NAB, TOM VOSA, SAYING: "This is symbolic. I think again a country where the tax ratios is already about 46% of GDP, really trying to squeeze a few extra percent out of tax will not work. We are very concerned that the French economy next year underperforms, it's almost on the verge of another technical recession, and I think the message from the government for higher taxes rather than spending cuts, is one that will give them difficulties. And I think there is plenty of room for political unrest in France through 2014." The measure has infuriated business leaders and football clubs, who at one point threatened to go on strike.

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France struggles to keep up with EU partners

Thursday, January 02, 2014 - 02:22