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French Economy Grows 2.7 Percent

February 25, 2000

PARIS (AP) _ The French economy has entered a period of strong growth, figures released Friday show, growing 0.9 percent in the final three months of last year and 2.7 percent in 1999 as a whole.

Buoyed by low interest rates and a relatively weak euro, the French economy expanded by close to an annualized 4 percent in the second half of last year, up from just 2 percent during the first six months. First half growth was hampered by the ill effects of the Asian economic crisis.

Other figures out Friday added to the optimism, showing high business confidence in France while consumer spending rose 1.4 percent in January, above market expectations.

With the German economy also looking up, evidence of strong growth in France has strengthened calls for the European Central Bank to tighten the screw, lifting interest rates to curb inflation.

But euro-zone governments have also been attempting to talk up the euro in recent months, underlining the single currency’s potential to rise against the U.S. dollar. An appreciation in the value of the euro could help put off inflationary pressures.

Underpinned by strong domestic demand, France’s economic growth is not expected to let up. Economists peg growth this year at around 3.5 percent, and regard the government’s own official estimate of 2.6 percent to 3 percent as excessively conservative.

This is France’s most sustained period of economic well-being since before the oil shock of the mid-1970s. It has allowed the leftist coalition government of Prime Minister Lionel Jospin to make political capital out of strong growth and the resulting lower unemployment. The government has also promised to cut taxes by $27 billion over the next three years.

The government forecasts that unemployment, the most nagging economic problem, will come down to single digits by the end of this year from its current level of 11 percent. Government critics have said falling unemployment is being achieved by the creation of thousands of part-time jobs.

The shortened workweek instituted by Jospin _ down to 35 hours from 39 hours _ was aimed at creating more jobs by hiring more personnel to maintain levels of productivity.

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