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IMF warns France over reforms, spending

Monday, June 03, 2013 - 01:12

June 4 - The IMF says France understands the need for structural and labor reforms, but it must step them up to go back to growth and boost competitiveness. Rough Cut (no reporter narration).

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The IMF said the France, euro zone's second-largest economy, would start turning around in the second half of the year. On Monday it halved its 2013 forecast for number one economy Germany based on uncertainty in other euro zone economies, including neighbouring France. In its report on France the organisation slightly trimmed its forecast to see the economy contract by 0.2 percent this year from a previous -0.1 percent forecast. The French economy is estimated to grow by 0.8 percent next year, from a previous 0.9 percent forecast. The Fund stressed that France must increase competition in product and services markets to improve its competitiveness, while focusing budgetary efforts on containing expenditure. IMF Mission Chief Edward Gardner told a news conference the French government showed that they understood the need for reform, but that efforts needed to be pursued. Gardner said France could regain consumer confidence more easily than some of its European partners because of generally low levels of debt. France says it will eke out 0.2 percent growth this year but the European Commission and most economists have already said they see it shrinking slightly, with the Commission projecting a 0.1 percent contraction. France entered a shallow recession in the first three months of the year as the economy contracted by 0.2 percent because of weak exports, investment and household spending. (SOUNDBITE) (English) INTERNATIONAL MONETARY FUND MISSION CHIEF FOR FRANCE EDWARD GARDNER, SAYING: "I would say that the number of reforms that have been initiated in the last six months certainly speak well of the government's understanding that France needs to be reformed. So I would see that as very positive. The uncertainty is in appreciating whether this is perceived to be enough or not and this is where we clearly say it's a first step in a long process." "We also see deep structural issues affecting growth potential in France due to loss of competitiveness as witnessed in losing market shares faster than some of its European partners and rigidities in labour and product markets." "French households and enterprises are not overburdened by debt and that means that they have the capacity to turn around and start consuming and spending if conditions are more favourable, and this is not the case throughout the rest of Europe."

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IMF warns France over reforms, spending

Monday, June 03, 2013 - 01:12