Why France needs to 'screw up more courage'
French President Francois Hollande at a news conference at the Oceanographic museum in Monaco on Thursday. (Eric Gaillard/Reuters)
All is not well in the bread basket of Europe.
News that the French economy contracted by 0.1 per cent in the third quarter surprised many on Thursday, when official government numbers were released by the INSEE statistics agency.
At $2.7 trillion, France has the second largest economy in the European Union, but it has had troubles recovering since the 2008 global market meltdown.
The poor economic numbers -- after three months of slight growth -- went hand in hand with a dressing down by the Organization for Economic Co-operation and Development. The OECD released a report on Thursday entitled Redresser la Competitivite, outlining weaknesses in the French economy and what needs to be done to turn things around.
The recent downturn is a result of shrinking exports and private-sector employment, and negative investment combined with steady private consumption, said Peter Jarrett, a senior OECD economist in Paris.
"It is still a picture of a very weak economy in France," Jarrett said.
"As the report said, a whole range of things need to be done and they need to get on with it and screw up more courage. Hollande is not going to get re-elected. He should do what he can for his country and get some reforms passed."
European parliamentary elections are set for May 2014 and Hollande's popularity has never been so low. Nearly one-quarter of French voters say they'd vote for the far-right National Front party in the next election, reports RT.com
Key problems facing France include the major gap between the country's education system, the available professional training system and market labour needs.
The report, presented last week to Hollande, recommends immediate corrective work be done to bolster research and innovation, particularly in small- and medium-sized companies, imposing public sector efficiencies and tax reform and concentrating on training young workers and those over the age of 55.
France must also take a hard look at its generous "nanny state" social programs, such as the high monthly child support. "People need to be more responsible for their economic destiny. Everybody has to share a little bit," Jarrett said.
France is viewed as a bellwether state in Europe. Whatever happens in France is a good indication of how the rest of the euro zone is doing.
"People look to France a lot. If French leadership was more courageous, some of the other governments would be too," said Jarrett.
Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga