Wave of strikes heralds more French gloom

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The Independent Online

Economics Correspondent

The recent wave of strikes and unrest has taken business confidence in France to its lowest for nearly two years.

The balance of firms reporting increased output compared with those saying production was down fell to minus 9 per cent in December, down from minus 6 per cent the previous month. It was the lowest balance since January 1994, according to an official survey published yesterday.

The survey showed that levels of finished stocks rose for the fourth month in a row, reflecting the economy's slowdown.

The national statistics office, Insee, reported that optimism about future output had plunged even more dramatically. The balance expecting to raise rather than reduce production dived from minus 21 to minus 36 per cent. The gloomiest sectors were the car and transport industries and manufacturers of semi-finished goods, although food and consumer goods manufacturers have also become more pessimistic.

Hans Tietmeyer, the Bundesbank president, yesterday tried to put an optimistic gloss on the outlook for the French economy by saying that he thought it would meet the conditions for taking part in European monetary union from its start in 1999.

Mr Tietmeyer said he could not envisage a monetary union without France. It was one of the ``core countries of European integration'', he told a German newspaper. The Bundesbank president said France had the ``will and ability'' to meet the conditions set out by the Maastricht Treaty. However, recent figures make Prime Minister Alain Juppe's chances of reducing the government deficit to below 3 per cent of GDP look slim. Growth is slowing sharply, while deficit-cutting plans are under threat after the wave of strikes.

The latest French industrial production figures showed a 1.9 per cent fall in October, following an almost equally sharp drop the previous month. Year-on-year output growth turned negative for the first time since the end of 1993.

Despite the depressing survey results, there was a slight recovery in share prices in Paris after a technical disruption in the morning. The stock market was reacting to Wednesday's announcement by the French government of new details of measures intended to stimulate consumer spending.