France Defends ‘Truly Solvent’ Economy After Labor Minister Michel Sapin Says Country ‘Totally Bankrupt’
By Moran Zhang | January 31, 2013 4:21 AM EST
Senior French politicians have been forced to defend the state of the country’s economy after Labor Minister Michel Sapin set off a storm of controversy by describing the nation as “totally bankrupt.”
In a radio interview on Sunday, Sapin replied to a question on the state by saying: “There is a state but it is a totally bankrupt state. That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
He later told the AFP news agency that he was speaking of the state of finances in the past and his comment did not apply to the government of current French President Francois Hollande. The minister said he was being “ironic” at the time.
French Finance Minister Pierre Moscovici immediately tried to play down Sapin’s comments, saying they were “inappropriate.”
“France is a truly solvent country, France is a truly credible country,” Moscovici added.
France’s total public debt topped 90 percent of the value of everything produced in the economy last year, well above the European Union’s target of 60 percent. Hollande has promised to reduce the country’s deficit to below 3 percent of output this year from 4.5 percent by cutting spending and hiking taxes.
In November, rating agency Moody’s downgraded France’s debt from Aaa to Aa1. The decision also came with threats of further downgrades if the government fails to implement reforms to fix France’s public finances.
France And Germany About To Diverge
Recent economic data suggest that France, Europe’s second-largest economy, is lagging further behind Germany and economists suspect that this gap between the euro zone’s two leading economies will widen as the year goes on.
“The relationship between France and Germany is likely to come under further strain, making compromises on important euro-zone policies difficult to reach,” Capital Economics senior economist Jennifer McKeown said in a note to clients.
Business sentiment data for January showed continued, albeit very gradual, improvement in the euro area, but also highlighted a striking divergence between the two biggest countries.
In Germany, the ZEW, the flash PMIs and the IFO exceeded expectations, with surging forward-looking components and resilient current conditions. Meanwhile, sentiment in France has deteriorated sharply. Flash composite PMIs have dropped nearly 2 points, back to levels not seen since August 2009. With the final release due at the beginning of February, French PMIs now look likely to be among the weakest in Europe, below Italy and Spain and only marginally above the Greek surveys.
Labor market developments are also depressing French consumer spending, with unemployment much higher than in Germany and still rising.
France’s economy is expected to have contracted in the last three months of 2012 and the first quarter of this year, and is set to post no growth in 2013, according to Bloomberg surveys.
Hollande has promised to reverse the trend this year, but the recent slow pace of labor market reforms suggests that any recovery will take longer to occur, McKeown said.
To contact the editor, e-mail:
Most Popular Slideshows
- ‘Sons of Anarchy’ Season 7 Finale Spoilers: Kurt Sutter On Ending The Biker Series And Picking The Right Song For The Final Ride
- Prince Charles’ Wife Camilla Parker-Bowles In Drug Scandal - Reports
- Prince Harry Kissing Mystery Blond, Cressida Bonas & Camilla Thurlow Are Distant Memory
- St. Louis Rams 28, Seattle Seahawks 26 [PHOTOS]
Join the Conversation
- Ebola ‘Cruise Ship’: Holidaymakers Furious Organisers Hid the Truth About Dallas Health Care Worker
- Canada Conducts Practice Drill Of Ebola Rapid Response Teams, To Send Experimental VSV-BOV Vaccine To WHO
- Vatican 2014 Final Synod Report: Gays Still ‘Unwelcome’ in Catholic Church, LGBT Thankful for First Step
- New Zealand Losing $9.4 Billion Every Year to Fraud
- 5 Cities With The Highest Cost Of Living In 2014
- Galaxy Note 4 vs Redmi Note 2 vs iPhone 6: Samsung in Danger with Depressing Q3
- iOS 8 Jailbreak Release Date Likely this October 2014 with Pangu not Evad3rs Firming Up as Creator
- Apple Inc. (AAPL) Stock Set to Soar Beyond $100 Despite Decline After New iPad Launch
- Russia Beefs Up Gold Reserves To Offset Heat of Sanctions And Undercut Dollar
- iPhone 6 vs Nexus 6 vs Galaxy Note 4: Performance and User Interface Comparison
- Fappening: Message Board Posters Belittle Nude Photo Leakers As D-Listers Seeking Publicity
- Fappening: Lindsay Clubine, Wife Of Boston Red Sox Pitcher Clay Buchholz, & George Sampson Of Britain’s Got Talent, Are The Latest Victims Of Celebrity Nude Leaks