The French economy contracted by 0.3 per cent in the second quarter of the year, the first quarter of negative GDP growth since 2002, DPA quoted the government's statistical office INSEE as announcing today. The announcement could be the first of a series of bad news for France's economy. French radio reported Friday that the unemployment figures to be made public on Monday will be the worst in 10 years, with up to 40,000 adults added to the jobless rolls in August. On Thursday, in a speech on the current economic crisis, French President Nicolas Sarkozy said that the turmoil in the American finance sector would affect French economic growth, joblessness and purchasing power. He also suggested that the country could be heading for a recession, which is defined as two consecutive quarters of negative economic growth. According to INSEE, the economic contraction in the second quarter was due in part to the second consecutive decline in household spending and a 1.7 per cent fall in exports. As a result of the crisis, Paris has renounced on its plans to balance its budget by the year 2012, French radio reported Friday. According to the budget presented to the cabinet on Friday by Budget Minister Eric Woerth, the public deficit will total 49.4 billion euros (72.07 billion dollars) in 2008, well above the 41.7 billion euros foreseen before the economic crisis. The new 2008 deficit represents 65.3 per cent of GDP, well above the ceiling of 60 per cent imposed by the European Union in its Stability Pact. In 2009, the deficit will total 52.1 billion euros, or 66 per cent of GDP, according to the budget presented on Friday.
