French business starts bounce back despite looming recession

New business starts in France rose 14.4 percent in January compared with the same level a year ago but self-employed, one-person business starts fell 4.6 percent in the same 12-month period, The National Statistics Institute said Wednesday. In the last quarter of 2011, INSEE noted that the number of business starts had climbed 2.3 percent. The evolution took place even though economists have warned France is in recession and will officially declare this at the end of March, after two quarters of negative growth. But despite the encouraging results and reinvigorated business activity reported for January and the last quarter of 2011, INSEE stressed that business starts have declined by 9.5 percent in the past year. France is forecasting only 0.5 percent growth in Gross Domestic Product (GDP) in 2012 and unemployment is expected to rise above three million, or 10 percent of the workforce in the coming months. Some observers say the growth level could be closer to 0.2 percent. The French economy also has a debt and public deficit problem, with the country's debt running close to 1.7 trillion Euros (USD 2.2 trillion), while public deficits are estimated now to be close to 90 percent of GDP. Under European budget rules, the public deficit is not supposed to exceed 60 percent of GDP but the financial and economic turmoil since 2008 has forced some relaxation of those rules. Several weeks ago, the Standard Poor's rating agency stripped France of its "Triple A" status because of the health of the economy and three days ago Moody's agency downgraded the evaluation of France from "stable" to "negative, " an alert which could mean that agency could also downgrade France from "Triple A" status. France is also entering a period of presidential and legislative elections so the government is hampered in taking tougher austerity measures to correct the national accounts.