The French economy is set to grow by just 0.2 percent in the first quarter, the central bank said on Monday, hampered by lacklustre factory output and the strength of the euro.
The Bank of France forecast suggests that the country, with the second-biggest economy in the eurozone, remains close to stagnation bringing little hope of turning around rising unemployment or restarting much-needed investment.
The new batch of data, based on a wide ranging survey of business leaders, presents "nothing transcendent, but nothing dramatic either," said Frederik Ducrozet, economist for Credit Agricole investment bank.
"All this points to growth of one percent on an annual basis," slightly better than 0.9-percent growth forecast by the French government, he said.
Factory output slumped back by 0.3 percent in December, the official INSEE statistics office said, having climbed by 1.2 percent in November.
The INSEE blamed the sudden contraction on strikes in the oil refinery sector, a sign that anger from workers on the wrong side of job cuts and reforms are beginning to hurt the economy directly.
President Francois Hollande, whose approval ratings are at the lowest ever for a French leader in the modern era, has now turned his sights on the economy in the hope of avoiding a heavy defeat in local elections next month.
Since January, the government has announced a raft of proposals, including a tax system reform, a review of the generous unemployment benefits, a drive to simplify regulations and a new body looking at the effectiveness of state spending.
But the centrepiece of Hollande's new agenda is a risky deal with France's employers' federation to cut high labour taxes in return for a promise by businesses to create a million jobs by 2017.
The deal marks a significant break with previous policy by the French Socialists that have historically chosen confrontation in labour talks rather than the quieter approach seen in Germany and Scandinavia.
The new strategy is controversial for much of France's traditional left and the danger exists that Socialist ranks may be broken as Hollande pushes through his agenda.
Ministers have begun meetings to work out how to cut spending by a further 50 billion euros ($68 billion) over three years.
In a dissent of sorts, Industry Minister Arnaud Montebourg, a leading figure of the Socialist's left flank, on Monday blamed the strength euro for France's problems rather than the high cost of doing business.
"We have the most depressive zone in the world and the currency that appreciates the most in the world. The situation is outrageous," the minister told newspaper Les Echos.
The challenge for Montebourg is to kickstart exports, a strategy that is punished by the overvalued euro, Montebourg said.
In a stark reminder of challenges facing Hollande, on Monday taxi services out of airports in Paris were at a virtual standstill, angry at a reform of opening up their industry to competition.
The French economy is set to grow by just 0.2 percent in the first quarter, the central bank said on Monday, hampered by lacklustre factory output and the strength of the euro.
The Bank of France forecast suggests that the country, with the second-biggest economy in the eurozone, remains close to stagnation bringing little hope of turning around rising unemployment or restarting much-needed investment.
The new batch of data, based on a wide ranging survey of business leaders, presents “nothing transcendent, but nothing dramatic either,” said Frederik Ducrozet, economist for Credit Agricole investment bank.
“All this points to growth of one percent on an annual basis,” slightly better than 0.9-percent growth forecast by the French government, he said.
Factory output slumped back by 0.3 percent in December, the official INSEE statistics office said, having climbed by 1.2 percent in November.
The INSEE blamed the sudden contraction on strikes in the oil refinery sector, a sign that anger from workers on the wrong side of job cuts and reforms are beginning to hurt the economy directly.
President Francois Hollande, whose approval ratings are at the lowest ever for a French leader in the modern era, has now turned his sights on the economy in the hope of avoiding a heavy defeat in local elections next month.
Since January, the government has announced a raft of proposals, including a tax system reform, a review of the generous unemployment benefits, a drive to simplify regulations and a new body looking at the effectiveness of state spending.
But the centrepiece of Hollande’s new agenda is a risky deal with France’s employers’ federation to cut high labour taxes in return for a promise by businesses to create a million jobs by 2017.
The deal marks a significant break with previous policy by the French Socialists that have historically chosen confrontation in labour talks rather than the quieter approach seen in Germany and Scandinavia.
The new strategy is controversial for much of France’s traditional left and the danger exists that Socialist ranks may be broken as Hollande pushes through his agenda.
Ministers have begun meetings to work out how to cut spending by a further 50 billion euros ($68 billion) over three years.
In a dissent of sorts, Industry Minister Arnaud Montebourg, a leading figure of the Socialist’s left flank, on Monday blamed the strength euro for France’s problems rather than the high cost of doing business.
“We have the most depressive zone in the world and the currency that appreciates the most in the world. The situation is outrageous,” the minister told newspaper Les Echos.
The challenge for Montebourg is to kickstart exports, a strategy that is punished by the overvalued euro, Montebourg said.
In a stark reminder of challenges facing Hollande, on Monday taxi services out of airports in Paris were at a virtual standstill, angry at a reform of opening up their industry to competition.
