Friday, 30 September 2011

France Is In Denial as Fragile Banks Add to Economic Woes

THE GUARDIAN: The second biggest economy in the eurozone is grappling with public debt, stalled growth and high unemployment

In her small fashion boutique in a village near Saint-Étienne, Valérie Dongrazi was feeling the pressure of French banking jitters and the economic rut.

The 44-year-old shopowner has not paid herself a salary for more than a year. When she did, it was €1,300 (£1,130) a month. She's had to start buying cheaper foreign stock as clients in her village in south-eastern France who once paid €270 for a good winter coat, can now afford just €150. To stay on top of overheads, she relies on going to her bank to increase costly overdrafts or ask for loans.

But with a big question mark over French banks' stability, shares in the biggest banks plummeting and talk of a state bailout, the lifeline of bank credit to businesses like Dongrazi's is drying up. French banks are nervous about lending money, companies are struggling and consumer confidence has fallen to the lowest level since February 2009, when France was suffering its worst recession since the second world war. "There's a mood of fear; people are not buying for pleasure, barely for necessity. I'm not optimistic," she said.

Rumours about the fragility of French banks and their ability to cope with losses from Greek debt has thrown a spotlight on the wider woes of the economy and its slippery hold on its triple-A rating. The shares of France's biggest banks have lost half of their value in just three months. In any other country, this might signal panic on the streets, but France believes it is battling bigger economic problems: spiralling public debt, stagnant growth, low business morale and high unemployment. » | Angelique Chrisafis in Paris | Thursday, September 29, 2011