French economy stalls as Francois Hollande is sworn in

The French economy did not grow at all in first three months of 2012 and the previous quarter's growth was cut, in a blow to new president Francois Hollande.

Official figures released on Tuesday showed that French GDP growth was 0pc in the three months to March 31. Growth in the last quarter of 2011 was revised down to 0.1pc from 0.2pc.

Official statistics agency INSEE said the economy grew by 1.7pc overall in 2011.

Inflation rose 0.1pc on a monthly basis after a jump of 0.8pc in March. Year-on-year inflation dipped to 2.1pc, back to the level seen in mid-2011.

Noin-farm payrolls rose 0.1pc (versus an expected 0.2pc fall), while wages climbed 0.9pc.

The growth figures will weigh on new president Francois Hollande, who will be sworn in later today after defeating Nicolas Sarkozy at the polls last week.

Within hours of the inauguration ceremony at the Elysee Palace, Mr Hollande will fly to Germany for crucial eurozone talks with Chancellor Angela Merkel.

Mr Hollande has criticised the German-led focus on austerity as a way out of the European economic crisis.

"We don't think the same on everything," he acknowledged on French television on Monday. "We'll tell each other that so that together we can reach good compromises."

Top of Tuesday's agenda is likely to be the failure of Greece to form a coalition government, which has raised serious questions about the debt-stricken country's ability to stay in the single currency.

Spain is also a hot topic as it tries to fend of a crisis in its banks.

Mr Hollande has vowed to confront a crisis in the public finances with a combination of a heavier tax burden and lower public spending, targeting a returning to a balanced budget by the end of his five-year term in office.

It is a tall order for a country swamped by an annual budget deficit of €100bn euros and a debt level of 90pc of GDP.

The crisis goes deeper. "Since 2005, export growth has fallen significantly below the euro area average," said the International Monetary Fund.

"Current account balances continue to deteriorate, raising concerns about the competitiveness of French exports. These contain a large share of low to medium-tech products that face competition from emerging economies," it said.

Fabrice Montagne, Barclays analyst, said: "The numbers add emphasis to the magnitude of the challenge facing the new government."

Despite the growth figures, the CAC rose 0.8pc in early trading after a heavy fall on Monday.

Meanwhile, Italy fell further into recession after growth in the first quarter contracted 0.8pc. The figure was worse than the 0.7pc contraction expected by economists.

SOURCE: http://www.telegraph.co.uk/finance/financialcrisis/9266292/French-economy-stalls-as-Francois-Hollande-is-sworn-in.html