French GDP falls short of rate needed to cut jobless number

French economic growth this year will fall short of the 1.5% economists say is the minimum needed to lower persistently high unemployment, the country’s central bank governor has said.

French GDP falls short of rate needed to cut jobless number

This spells trouble for President François Hollande, who has staked his bid for re-election in 2017 on a promise to reduce joblessness, which remains stuck above 10%.

Bank of France governor Francois Villeroy de Galhau’s prediction comes a day after Mr Hollande’s government was forced to water down some of the pro-business labour reforms it hoped would encourage employers to hire staff.

“We (the ECB) revised growth down to 1.4% for the whole of the eurozone, and France will be a bit below that,” Mr Villeroy said on France Inter radio.

Mr Villeroy also sits on the European Central Bank’s governing council.

Economists agree that given the large number of young people entering the job market, at least 1.5% growth is required to nibble away at the jobless total.

The government has been sticking to a forecast of 1.5% for this year and has focused on a set of changes to its employment laws in the hope they will stimulate hiring and economic activity.

However, faced with street protests, union opposition and a rebellion on the left of the ruling Socialist Party, prime minister Manuel Valls dropped plans to impose a cap on severance pay for dismissed workers, along with other measures business leaders had wanted.

Opponents of the proposed law in its previous form said it would only erode workers’ rights and was a charter to sack people.

A revised version of the law will now go before parliament in the coming months.

A Harris Interactive opinion poll last month put voter confidence in Hollande at just 17%, the lowest since he was elected in 2012.

In a television interview yesterday, prime minister Valls was asked whether he backed Mr Hollande as a presidential candidate.

“Obviously, François Hollande is the legitimate candidate as president,” he told BFM TV.

“But... the person who will make that decision is the president himself.... It’s too early to talk about it, but I believe the president of the republic is a legitimate candidate,” he said.

The Bank of France said earlier this week that its net profit rose 8% last year as the French central bank set aside fewer provisions for risks and paid less tax than the previous year.

The Bank of France reported a net profit of €2.22 billion, up from €2.06bn in 2014. It will pay corporate tax of €1.9bn after a bill of €2.15bn for 2014.

It said it had put aside €504 million for its general risk provision fund, bringing the total to €8bn.

The previous year, the central bank had set aside €592m. Under the ECB’s asset purchase programme, the Bank of France bought €134bn of assets between October 2014 and the end of 2015, when its balance sheet reached €710bn.

The Bank of France’s operating income was largely stable last year at nearly €7bn, with the ECB’s main interest rates at historically low levels.

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