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Hollande under fresh pressure after France enters recession

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(Globalpost/GlobalPost)

President Francois Hollande holds a key press conference Thursday, a day after his first anniversary in office was marred by news that France had fallen back into recession amid plummeting economic indicators.

The Socialist leader, who is the most unpopular post-War president according to opinion polls, had pledged to turn back double-digit unemployment in Europe's second-largest economy this year, but that now seems highly unlikely.

He faces mounting pressure to reshuffle his cabinet due to criticism over uncoordinated economic policy and a need to deepen and accelerate economic reforms, issues which he could address in the keenly-awaited press meet.

National statistics agency INSEE said Wednesday that the French economy slid into recession -- two consecutive quarters of contraction -- in the first three months of the year with the economy shrinking by 0.2 percent.

The eurozone meanwhile posted its sixth straight quarter of economic contraction while the German economy -- the bloc's economic powerhouse -- expanded by 0.1 percent in that quarter.

"On all fronts it's disaster: France is in recession, the purchasing power has fallen for the first time in 30 years and unemployment is spiralling," Le Figaro newspaper said in a scathing editorial entitled "The price of inertia."

In March, the number of unemployed French jobseekers reached a 16-year high, hitting 3.2 million or 10.6 percent.

The jobless data was a huge set-back for Hollande, who in September gave himself one year to reverse the curve. In late December, he moved the goalposts, saying the trend would be bucked by the end of this year.

To curb unemployment, economists estimate that France needs annual growth of around 1.5 percent.

But an INSEE study Thursday predicted more gloom saying companies were projected to cut investment by four percent this year.

INSEE blamed the recession on falling household consumption, which suffered its most significant drop in 30 years in 2012, and a fall in exports in the first quarter of this year.

To add to Hollande's woes, there has been growing criticism that there is no single "boss" to coordinate economic policy, a line taken by Foreign Minister Laurent Fabius who was in charge of the finance ministry between 2000 and 2002.

The finance ministry, headed by Pierre Moscovici, has seven senior and junior ministers and been at the centre of scandals including the charging of ex-budget minister Jerome Cahuzac for tax fraud over an undeclared Swiss bank account.

The ministers have often spatted in public and made conflicting statements about policy. The economic malaise and the mounting discontent with the government's performance, has fuelled talk of a cabinet reshuffle and increased pressure for accelerated reforms.

The French economy is also hamstrung by poor competitiveness and low business and consumer confidence.

Hollande's government still expects a slight decline in jobless figures in the last quarter owing in large part to a gradual recovery of global activity.

Hollande on Wednesday said it was "likely that there will be zero growth in 2013" but added nonetheless that "it is my view that we are past the worst".

Finance Minister Moscovici had previously said that a tiny economic expansion of 0.1 percent was still expected this year.

France had unveiled a slew of belt-tightening measures to slash its deficit to the European Union limit of less than three percent of gross domestic product (GDP).

The EU has signalled it will likely give France an extra two years, to 2015, to meet the deficit limit, although Paris will be obliged to undertake reforms in return.

The current French recession is not on the scale of the one in 2009, when economic activity declined by 3.1 percent due to a global slump triggered by the collapse of the US investment bank Lehman Brothers.

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http://www.globalpost.com/dispatch/news/afp/130516/hollande-under-fresh-pressure-after-france-enters-recession