Tags: French | Nation | Social Tinderbox

French Discontent Raises Fears of 'Social Tinderbox'

By    |   Sunday, 17 Nov 2013 05:37 PM

As their economy slides and discontent builds, French officials are calling their country a social tinderbox, according to The Telegraph, of the U.K.

The French economy shrank 0.1 percent in the third quarter. The country's unemployment rate has steadily increased, hitting 11.1 percent in September.

The jobless rate would be even higher if French weren't leaving the country in droves. The workforce has fallen to 15.9 million, the lowest in eight years.

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"It is no longer a question of whether the eurozone can achieve 'escape velocity,' but whether it can grow at all," said sovereign bond strategist Nicholas Spiro, according to The Telegraph.

France is "explosive everywhere," said Thierry Lepaon, head of France’s Confederation of Labor (CGT), The Telegraph reported.

A government survey cited by the French newspaper Le Figara showed the dire situation. "All across the country, the prefects described the same picture of a society that is angry, exasperated and on edge," the report stated. "A mix of latent discontent and resignation is being expressed through sudden eruptions of fury, almost spontaneously."

Inflation fell to 0.6 percent in October. Observatoire Economique, which studies economic conditions, warns that the country may fall into deflation next year, The Telegraph said. Saying fiscal austerity is "suffocating the economy," it says the fiscal tightening should be loosened and the European Central Bank to scoop up bonds.

Paul Sheard at Standard & Poor's, The Telegraph reported, argued that fast and strong action is needed to avert deflation.

"You have to pull all the levers at once, and you can’t rely on cheap talk. I am afraid Europe may be drifting towards a Japanese situation, but they also face a problem that is orders of magnitude greater than in Japan because of the architecture of monetary union."

Deflation is serious danger for the eurozone, agrees Paul Krugman in a piece published by  The New York Times.

European inflation has fallen below target this year, as consumer prices rose only 0.7 percent. The ECB cut interest rates, a move Krugman called "obviously appropriate and obviously inadequate," saying it will make little difference.

The central bank is supposed to keep inflation close to 2 percent, or some countries may descend into deflation, with ugly results.

"Europe’s economy clearly needs a boost, but the ECB's action will surely make, at best, a marginal difference. Still, it was a move in the right direction," Krugman said.

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As their economy slides, French officials are calling their country a social tinderbox, according to The Telegraph, of the U.K.
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Sunday, 17 Nov 2013 05:37 PM
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