France's economy is expected to stabilise in the third quarter after pulling out of recession, Economy and Finance Minister Christine Lagarde said Sunday. "The economy is slowly stabilising, stopping its decline. We are not going down," Lagarde told Europe 2 radio.
"There are a certain number of indicators leading us to believe that it will have stabilised" in the third quarter, she said. "We have even begun to go up, like Germany, Japan." Germany and France, the two largest economies in the 16-nation eurozone, enjoyed growth of 0.3 percent in the second quarter, snapping out of a year-long recession that has led to massive job losses. The French economy contracted by 1.2 percent in the first quarter and the finance ministry is still bracing for a 3 percent drop in output in 2009.
The government is predicting a return to growth in 2010. Turning to France's ballooning deficit, Lagarde said the government "obviously must take control of public spending" but she cautioned that timing was important. "We are in an extremely vulnerable period and we must not cause a breakdown by tightening the screws," she added.
France's general deficit is expected to reach between 7 and 7.5 percent of GDP in 2010, more than double the 3-percent ceiling set by the European Union.