After the French national statistics office, INSEE, announced Friday that French gross domestic product (GDP) had dipped during the second quarter of 2008 and forecast a decrease for the next two quarters, French Budget Minister Eric Woerth admitted that France had entered a period of “technical recession".
A recession is defined by economists as at least two consecutive quarters of economic contraction.
“Recession”, a touchy topic
France’s political opposition has been increasingly vocal in recent months about the possibility of a recession, but French citizens had to wait until Friday to hear Woerth say the word “recession”, though he also claimed that the “reality of the situation” was otherwise.
Woerth said that over the entire year the economy is expected to grow by one percent - not a great achievement, but growth all the same. This increase rests mainly on first-quarter performance.
"One-percent growth. That's not a recession; it's very weak growth," Woerth insisted.
Of course it's a recession, says the opposition
"Yes, the recession is here," Socialist leader Francois Hollande told the daily newspaper Le Parisien.
The vice president of the French centrist party MoDem, Marielle de Sarnez, said that INSEE told the French something they already knew. “They see [the recession]; it has affected their lives over the last two months,” she said. It has “reduced their buying power and increased unemployment”, she added.
Her point of view is shared by trade unions which condemn the government’s lack of transparency. Bernard Thibault of the giant trade union CGT said: “The government should know that there is no point in clouding the issue.”
“The French are ready to hear the truth”: interview with economist Nicolas Bouzou
Nicolas Bouzou, an economist and director of the consultancy Asteres, said: “The French are ready to hear the truth.” He added that the “figures released by the statistics office show the reality of the economic situation”.
France 24: How would you define a “recession”?
Bouzou: There is a very simple economic definition of the word “recession”. It’s a drop of GDP over two consecutive quarters. More generally, a recession is also a period of economic malaise coupled with an increase in unemployment.
F24: Is the recession a direct consequence of the financial crisis?
Bouzou: Yes, the French recession is mostly caused by the financial crisis which is destabilising all developed countries. This crisis has had repercussions on France’s external trade, which is dipping due to the difficult international situation. Companies are less inclined to invest and have become much more cautious.
F24: Does this mean that France has entered a period of recession?
Bouzou: That’s true today. Not only has France’s economy shrunk over the last two quarters, but the job sector is not looking good either. Economists agree with the INSEE forecasts for the last two quarters of 2008.
F24: Eric Woerth refers to a “technical recession” while maintaining that the reality is otherwise. Is that true?
Bouzou: I don’t agree at all with Eric Woerth. I think it’s important to tell the truth, because the French are ready to hear it. It’s terrible to say that the situation is fine and then admit it isn't. It’s true that the INSEE figures for the last two quarters of 2008 are just forecasts, but one glance at the economy shows clearly that these forecasts will be proved true at the end of the year.
F24: How long will this period last?
Bouzou: When a developed country enters a period of recession, it rarely lasts more than three quarters. If you look at the growth figures for the whole of 2008, GDP will increase by 1%. But we have to wait until all the pieces are put back together to see a real recovery, which won't happen before the end of 2009 or beginning of 2010.