French unemployment rises

More French companies are cutting jobs

French unemployment rose for the first time in three years on Tuesday, sparking fears that it is finally being hit by the global economic slowdown.

The jobless rate in Europe's second largest economy rose by 0.1% to 8.8% in June.

Commenting on the data, French Labour Minister Elisabeth Guigou tried to shifted attention to positive trends such as a reduction in unemployment among young people, a drop in long-term unemployment and a sharp reduction in forced redundancies in June.

Strong economic growth has helped France trim dole queues since the Socialist-led government inherited a 12.6% jobless rate in 1997.

French downturn?

Now, the fortunes of the eurozone's star economic performer could be on the turn as the global downturn spreads.

Telecoms equipment maker Alcatel last week joined white goods manufacturer Moulinex, food group Danone and IT consultancy group Cap Gemini Ernst & Young in making massive job cuts in response to falling global demand.

There have also been fears of widespread job losses at UK retailer Marks & Spencer, which has 18 stores in France, and struggling airline group AOM/Air Liberte.

The numbers come at a bad time for the socialist Prime Minister Lionel Jospin, who is facing a presidential election next year.

Mr Jospin is expected to challenge President Jacques Chirac in the 2002 poll.

The euro was not affected by the news, remaining stable against the dollar at $0.876 at 1100 GMT.