EU on edge again with France debt fears
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BRUSSELS, Feb 21 AFP
February 22 2013, 05:24AM
Europe releases its latest economic forecasts on Friday - with a weak growth outlook likely to push France into overshooting EU budgetary targets and possibly triggering an intensification of the eurozone debt crisis.
After months in which the twin threat of government debt and recession appeared to be receding, recent data suggests the French economy will fail to rebound this year.
France's financial woes pose a pointed political problem as the EU strives to maintain momentum for tough economic reforms and balance painful austerity with anger over high and mounting unemployment.
The French economy has a gloomy outlook, going by a closely watched survey of private business activity released on Thursday, with purchasing managers suggesting a downward spiral sharper than at any time since March 2009.
The French government said this week that it will soon revise down its 2013 growth forecast, which will hinder its efforts to meet its EU obligations to cut its deficit.
More broadly, the latest feedback implies that the eurozone "is on course to contract for a fourth consecutive quarter in the first three months of the year", said the London-based Markit survey's boss Chris Williamson.
The French economy could be heading in the first quarter of 2013 for its worst performance in four years - putting pressure on Brussels to act, or explain leniency under EU rules tightened since the crisis first erupted in Greece.
The European Commission forecasts will show how far off the pace France and other countries are when it comes to an obligation to get public deficits back within the nominal EU limit of three per cent of gross domestic product (GDP) this year.
Within the eurozone, only Belgium, Italy, Austria and the Netherlands appear to be on the right track, said Amsterdam-based Carsten Brzeski of ING Bank in a note to investors.
Leaders across the EU are concerned about total unemployment of 26 million people, with the bloc's budget already tweaked to redirect billions towards reducing chronic youth unemployment in Spain and Greece especially.
The Group of 20 major world economies also now wants a softer approach to austerity cutbacks.
Street demonstrations and strikes remain a recurrent EU backdrop. About 50,000 people protested in Greece on Wednesday, and the EU capital of Brussels was also thronged by 30,000-40,000 demonstrators on Thursday angered by a salary freeze.
By Aurelie Mayembo