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
- Kristen Stewart Moving On With Nicholas Hoult, Jennifer Lawrence Dating Chris Martin – Reports [PHOTOS]
- Kate Middleton Suffocated in Kensington Palace, Queen Elizabeth Reported War With The Duchess [PHOTOS]
- 2014 MTV Video Music Awards: Everything To Know [PHOTOS]
- Chris Martin Dating Reports: Jennifer Lawrence Vs Gwyneth Paltrow [PHOTOS]
Join the Conversation
- Russia Demands Ukraine Release Communications With Doomed Malaysia Airlines MH17, Preliminary Report On Investigations Out This Month
- Ebola Update: Liberian Forces Receive Shoot Orders Against People Trying to Cross from Sierra Leone Border
- Historic First Time: Catholic Pontiff Pope Francis Supports Military Intervention Against ISIS In Iraq
- Chinese Airlines Receives Lawsuit for Rejecting HIV-Positive Passengers
- Travel Alert: Canada Issues Warning Against Chikungunya Disease in Caribbean
- Robin Williams Goodbye Video Hoax: Facebook Users Warned of Celebrity Suicide Exploitation
- 4 Killer Android Features Apple Fans Would Love to Get Come the iPhone 6 Release Date
- ISIS Posts Graphic Beheading Video of US Journalist James Foley
- Nexus 6 Release Date Dilemma with Motorola Shamu Details Pointing to Better Smartphone and Killer Features
- After James Foley, ISIL Threatens to Behead Another American Journalist Steven Sotloff
- Moto X Android 4.4.4 KitKat Update Guide: AT&T/Sprint Release and When to Hit Your Region
- Motorola Moto X+1 On Release Date To Come With Snapdragon 800 Processor, 2 GB RAM, 4K Recording And 5.2-Inch Display