INSEE estimated that GDP has again stalled in the second quarter. Michel Sapin took note revising down growth forecasts Government for 2014 Are you surprised by this outperformance against the French economy?
No. In recent weeks, all indicators that assess the ongoing evolution of GDP had suggested that the second quarter would be as sluggish as the first. It was obvious that the government would be forced to significantly revise down its growth target. And the Minister of Economy has probably been right to do so as we approach the weekend of August 15, instead of waiting for the fall. This reduces the political impact of this announcement.
But the figure of 0.5% forecast for 2014 you seem realistic?
Yes. We expect our growth to between 0.4% and 0.5% for the full year, the economic situation had every chance to remain as unfavorable in the second half. Still, I am particularly concerned about the near record bankruptcies and low profitability of French companies.
In these conditions, a reduction of the deficit to 3% by 2015 is a mission almost impossible …
This is what is unfortunate. It is indeed likely that Michel Sapin will begin a European tour to try to win some time. And given the indulgence shown by Brussels so far with regard to France, the fear is that the government actually gets more time to reach 3%.
Why -this regrettable?
Because without a strong pressure both from Europe and financial markets, France will continue to go backwards towards the reforms really allow it to become more competitive. Watch the debate in recent days, has shaken the political sphere about excluding military spending calculating deficits. In itself, this application is not illogical, but in the current context, it may be interpreted by our partners as a headlong rush reflecting a structural inability of France to meet its European commitments. Yet this debate could well be expanded and include such investment spending or education, but it comes too late. This is not a weakened France diplomatically isolated and has the credibility to revive and bring this ambition in Brussels.
The markets, they seem to trust France. Rates continue to fall …
In fact, since the beginning of the 10-year yield reached regularly lows. And he even fell this morning at 1.412%, a level not seen before. But it would be wrong to see these low levels of expression of any good report with regard to government action. These very attractive rates simply reflect the fact that Germany is taking over the financial markets, investors have no choice but to turn to the French debt that appears, at European level, as less unhealthy compared to Spanish or Italian debt, for example. The horizon is clearly not tragic for the French economy. Serious recession null in sight, not even a sharp rise in the unemployment rate , only the economic stagnation awaits us. Still, the best thing that could happen would be to France to face a strong tension on the bond market . A 10-year rate increasing to 3%, that that would force the government to act quickly instead of procrastinating.
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