More woe for Hollande as French economy hits recession

 Hollande eyes cabinet reshuffle Paris – Arabstoday France fell into recession in the first quarter of this year with the economy shrinking by 0.2 percent, official figures showed Wednesday, in further bad news for President Francois Hollande's embattled Socialist government. The data from the official INSEE statistics agency came exactly a year after Hollande's inauguration, with the president already struggling to tackle a 16-year high in unemployment and record-low approval ratings.
The government's woes have fuelled speculation of an impending cabinet reshuffle, with the talk intensifying after Foreign Minister Laurent Fabius on Tuesday said the finance ministry lacked a proper "boss" to coordinate economic policy.
INSEE blamed the recession on falling household consumption, which it said suffered its most significant drop in 30 years in 2012, and a fall in exports in the first quarter.
Finance Minister Pierre Moscovici insisted that the recession -- the result of two consecutive quarters of contraction -- was "not a surprise" and was "largely due to the environment in the eurozone.”
Figures released by the European Union on Wednesday showed the eurozone's recession deepening with 0.2 percent contraction between January and March, the fourth consecutive quarterly shrinkage.
Moscovici said a tiny expansion of 0.1 percent was still expected for the French economy -- the eurozone's second-largest -- for 2013 and maintained the government's promise of reversing the rise in unemployment by the end of the year.
"Now we must strengthen our economic systems, mobilise all of our energy to create jobs and to ensure that we have an economy that is more flexible, more competitive, more responsive, more creative and more innovative," Moscovici told journalists.
The recession, which came after the economy also shrunk by 0.2 percent in the last quarter of 2012, was not however on the scale of the one in 2009, when French economic activity declined by 3.1 percent.
Government spokeswoman Najat Vallaud-Belkacem said Hollande told ministers at a cabinet meeting on Wednesday that the situation was "serious" but noted that the recession was "not as deep as the one in 2008-2009.”
The French opposition was quick to pounce on the news, with ex-prime minister Francois Fillon of the right-wing UMP blaming the recession on government inaction since Hollande took power.
"Francois Hollande's government stopped all reforms, cancelled them, and did not replace them with any real initiative for competitiveness," Fillon told news website lopinion.fr.
He called for "a real project of deficit reduction that is based on (cutting) spending," tax cuts for businesses and an increase in France's 35-hour work week.
But Vallaud-Belkacem blamed the rise in unemployment and drop in purchasing power on "economic policies carried out earlier," under the government of right-wing ex-President Nicolas Sarkozy.
INSEE on Wednesday revised its data for the fall in household consumption in 2012, more than doubling its figure from 0.4 percent to 0.9 percent.
The fall was mainly linked to drops in automobile purchases and in spending on hotels and restaurants.
Household consumption, a key driver of the economy, was down another 0.1 percent in the first quarter of 2013, the agency said.
Exports were also down 0.5 percent in the first quarter, another reason cited by INSEE for the slide into recession.
Hollande was to meet European Commission chief Jose Manuel Barroso and other commissioners in Brussels on Wednesday for talks on boosting eurozone growth and France's efforts to reach EU deficit targets.
The Commission has already said it will grant France a two-year delay to 2015 for the country to reach the EU target of bringing its deficit to three percent of Gross Domestic Product (GDP).
Speaking to French radio on Wednesday, Barroso said "France has lost competitiveness in the last 20 years" and that it was unfortunate the country "sometimes has a very negative view of the opportunities of the modern world, for example of globalisation.”