France on brink of recession, admits premier

French Prime Minister Jean-Pierre Raffarin has, for the first time, admitted the country is on the brink of recession.

With several other EU nations already floundering under shrinking economies, Raffarin told the financial newspaper La Tribune that France faces “a recessive context” in the national economy.

The remarks appeared to confirm many economists’ forecasts that France’s gross domestic product would stagnate this year, a prospect deemed “premature” last week by Budget Minister Alain Lambert.

Raffarin’s centre-right government is in a jam - It wants to cut taxes to help stimulate the economy, but such a move would trim tax revenue at a time of ballooning budget deficits that have topped the EU Commission’s limits.

Many economists said Raffarin’s comments ride on a wave of profound pessimism of French consumers and producers – highlighted by a record high 17% savings rate among French consumers.

“People save because morale is low, because they’re anxious about the future”, said Jean-Michel Boussemard, deputy head of the economic think tank Rexecode.

The European Commission must decide tomorrow whether Paris has adequately sought to rein in spending. If not, the 15 member body could move to impose hefty fines on France by January.

Several other EU countries, including Germany and Italy, are in a mild recession. A recession is typically defined as two successive quarters of falling GDP.