France continues to suffer with economic problems despite overall recovery in the Euro zone and record low interest rates.
- Today current account data showed that deficit is persistent in France. Deficit was -0.3 billion.
- Moreover slowdown in both manufacturing and services sector accelerated, as indicated by recent PMI reading.
Economic problems at a glance -
- French economy is hardly growing. YoY average growth rate remains below 0.5%. Growth in the fourth quarter remained well below Euro area average as estimated by Euro stat.
- Unemployment rate still hovering above 10%.
- Industrial output in January barely grew at 0.4%, down from previous 1.4%.
- Inflation rate is maintaining below zero percent.
Budget issues at a glance -
- France failed to achieve the budget deficit target of 3% this year and asked for another extension of two years.
- The extension was granted on Tuesday by European commission but not without heated debate and discussion.
- Countries like Ireland, Portugal, Spain, and Slovakia raised concern over preferential treatment and demanded the same treatment for them.
Impact -
- French government won't possibly get another extension, which might lead to quite some cuts as current deficit stands over 4%. This is not expected to bode well for already ailing economies and sectors.
- French bonds are yielding in negative territory as ECB buys bonds however without a turnaround the bonds and CAC40 stocks might not do well in the future.
