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Concerns grow over state of French economy

Fears about France's ability to end recession
Fears about France's ability to end recession

French industrial production continued to decline in June, widening the economic gap with Europe's largest economy, Germany, and raising concerns about its ability to emerge from recession.

France's national statistical agency, INSEE, said that industrial production shrank 1.4% from a month earlier. That followed a 0.3% monthly drop in May.

Within manufacturing, steep declines were recorded in the food and car industries.

France's figures stand in stark contrast to Germany, where industrial production grew 2.4% in June.

Today's figures signal bad news for French President Francois Hollande. He has promised to reverse the rise in unemployment by the end of the year, but that is looking increasingly unlikely.

Unemployment hit 10.8% in the first quarter, and some economists say it will not peak until at least next year.

The International Monetary Fund this week called on Hollande's government to accelerate economic reforms, saying the rigid labour market, high taxes and inefficient public spending are dragging down the economy.

There are concerns that the worst is yet to come. France's economy is now officially in recession again, after gross domestic product shrank 0.2% in the first quarter.

INSEE will release its first estimate of second-quarter GDP next week. The French government expects a 0.2% rise in growth during the quarter, bringing the country out of recession. But some independent analysts expect a flat reading and, after today's figures, the risk is GDP will undershoot expectations.

The weak French economy has even raised concerns in the US. Earlier this week, Dallas Federal Reserve President Richard Fisher said in an interview with German newspaper Handelsblatt that he was worried about the country, saying the financial risks there should not be under estimated.