French economy outshines Germany

French job cuts expected to hit figures in late 2001

Unemployment has fallen to a 18-year low and economic growth has been revised upward in France - on the same day as the German government was forced to sharply cut its growth forecast.

The French jobless rate fell to 8.7% in March, the lowest since September 1983.

Separately, data from statistics institute INSEE showed gross domestic product in Europe's second largest economy growing 1% in the last three months of 2000, an upwards revision from an earlier estimate of 0.9%.

France is the success story of Europe as far as the large economies are concerned.

Philip Chitty, ABN Amro

Meanwhile, economic expansion in Europe's largest economy, Germany, is expected to be only 2% in 2001. The original forecast was nearly a third higher, at 2.75%. Last year, the German economy expanded at 3 %.

"France is the success story of Europe as far as the large economies are concerned," said economist Philip Chitty of ABN Amro.

However, the outlook for France could be soured by a spate of recent job cuts by major companies. Experts, though, say the lay-offs are unlikely to have an impact on the level of unemployment until the second half of 2001.

ECB rates

The data comes a day after the European Central Bank declined to cut interest rates.

The ECB has repeatedly argued that there are no signs of a European recession and that risks of a spill-over from the US slowdown are limited because it accounts for only a small portion of the eurozone's exports.

There is a growing rift between the ECB's policy on interest rates and those of central banks in the United States and other industrialised countries.

The US Federal Reserve, the Bank of Japan and the Bank of England all have cut rates to stimulate their economies.

The ECB's stresses its mandate is to focus on maintaining price stability and keeping inflation low.

French outlook

Healthy economic growth has helped France trim dole queues almost continuously since June 1997, when the Socialist-led coalition inherited a 12.6% jobless rate.

Job cuts by Danone were widely criticised

Buoyant household spending and consumer confidence has allowed France to ward off the impact of the US slowdown, making it the star performer among core eurozone economies.

"The French labour market is still performing much better than Germany and Italy with considerable ease and the consistent fall in the last few quarters is the reason spending has been so robust," said Mr Chitty.

But French businesses have started cutting workers as the global economy slows.

Troubled French appliance maker Moulinex-Brandt on Thursday staked its future on a make-or-break rescue plan that will shut six plants and cut 4,000 jobs worldwide.

Moulinex's plan follows lay-offs by food group Danone and the closure of the French operations of UK retailer Marks & Spencer, which have caused mounting political outcry.

German downturn

The German government slashed its growth forecasts saying the global economic slowdown would sap strength from the continent's biggest economy.

Production in Germany is falling

A reduced forecast for Germany could cause difficulties for the 11 other eurozone countries because it accounts for nearly 35% of the group's economic output.

A revision of the growth figure had been expected and mirrors those of the International Monetary Fund and the European Commission.

In a report earlier this month, Germany's six leading economic institutes said the country's growth would slow to 2.1% this year rather than the previously predicted 2.75%.

The IMF lowered its growth forecast for Germany on Thursday to 1.9% this year rising to 2.6% in 2002, while the European Commission lowered its estimate to 2.25% for 2001 and 2.5% next year.