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French economy returns to recession

French economy returns to recession


Official figures show France has entered its second recession in four years after the economy shrank by 0.2% in the first quarter of the year.

Its economy shrank by the same amount in the last quarter of 2012. A recession is defined as two consecutive quarters of negative growth.

France has record unemployment and low business and consumer confidence.

German figures, also released, showed its economy, the eurozone's strongest, grew by just 0.1% in the first quarter.

France entered its worst recession since World War II in 2009. Although it was thought to have been in recession in 2012, these figures have now been revised to show only one quarter of negative growth.

The news comes on the first anniversary of Francois Hollande being sworn in as president.

Weakness

Earlier this month, the European Commission warned that France would enter recession this year and said the eurozone's economy would shrink by 0.4%.

The European Central Bank cut interest rates at its last meeting to a record low of 0.5% in an attempt to stimulate growth.

In France, the rate of unemployment is running at 10.6% and is forecast to rise further next year.

Its deficit is also expected to rise sharply, the commission says, to 3.9% of GDP - well above the EU deficit target of 3%.

But French unemployment is below the eurozone average, which was 11.4% in 2012 and is expected to hit an average of 12.2% this year. In both Greece and Spain, it is expected to peak at 27%.

The German growth figure was far weaker than expected. Economists had expected to see growth of 0.3% in the first quarter.

Annual figures from the Statistics Office also show the German economy has shrunk by 1.4% when compared with a year ago.

But in a statement it said this was partly due to severe winter weather: "The German economy is only slowly picking up steam. The extreme winter weather played a role in this weak growth."

(Agencies)

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