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MENAFN - AFP - 05/07/2013
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(MENAFN - AFP) The French trade deficit, a critical problem for the recession-hit economy, worsened sharply in May, official data showed on Friday.

Although the data for a single month can vary considerably, the overall picture is grim for efforts by the left-wing government to boost industrial competitivity, growth and tax revenues.

The trade balance showed a deficit of 6.01 billion euros (7.7 billion), rising above 6.0 billion euros for the first time since June 2012.

This outcome was 1.5 billion euros worse than the deficit of 4.5 billion euros in April.

Exports fell particularly to areas outside the European Union, notably to Asia, the Middle East and Africa.

These areas represent emerging economies which are considered to be of vital importance to exporters in Europe.

The figures for May, published by the French customs service, were undermined by renewed weakness in the export of transportation equipment, and notably aircraft and aerospace equipment.

Exports of Airbus aircraft are a huge positive factor in the trade balance, and Airbus took firm orders totalling 39.3 billion at the Paris Air Show two weeks ago.

But in terms of money earned by exports in May, the customs service said: "After two months at a very high level, deliveries of products by the aerospace and ship sectors fell back."

Overall exports totalled 36.1 billion euros from 37.7 billion euros in April, to show one of the worst monthly performances since 2011.

Imports totalled 42.1 billion euros. Big factors were imports of pharmaceutical products from Ireland, of mobile phones from China and a rise of the cost of energy imports.

A trade deficit can be a drag on growth in an economy while a surplus boosts output, and France has been running a huge structural deficit for years.

In the 12 months to the end of May, the deficit totalled 63.3 billion euros and in the whole of 2012 the deficit was67.1 billion euros.

By contrast Germany, the other main and bigger economy in the eurozone, had a trade surplus of 17.7 billion euros in April after a surplus of 17.6 billion euros in March.

The French government regards the trade deficit as a vital problem for the economy and living standards, and has introduced some changes to the tax and labour laws to boost competitiveness.

But the European Commission has said that France must pursue deeper reforms to make its economy more efficient, in return for allowing the country an extra two years to reduce its budget overshooting to 3.0 percent of output.

On Wednesday the new head of the French employers' federation MEDEF, Pierre Gattaz, warned the government that his members could no longer accept increases in taxes and social charges "which burden our activities".

Analysts at Morgan Stanley bank warned this week that the French trade deficit was the main factor in an overall deficit on all regular payments in and out of the country, and that this could cause strains in financing national debt.

They said that the payments deficit was equivalent to 2.3 percent of gross domestic product in 2012, the worst figure for more than four decades.

"The driving force behind this downward trend has been the slump in the trade balance, stressing the competitiveness issues," they said.

But so far investors were "overlooking" the sharp worsening of France's external accounts which reflected "broad structural problems in the economy."

Savings within France would not be enough to finance the public debt and foreign investors could demand higher interest rates, they warned.

These factors "could cause a problem for financing government debt."

Meanwhile there is controversy in France within the government, and over calculations by the auditing office and the right-wing opposition, over the outlook for the severely strained public finances.


 


AFP




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