Shock French slump as Airbus crisis bites ( Zero growth )

Telegraph (UK ) ^ | 11/11/2006 | Ambrose Evans-Pritchard

[Leisler]

The French economy slumped in the third quarter as the Airbus crisis began to exact its toll, dousing hopes that Europe would take over as world's growth engine as America slows. Growth sank to zero with an accelerating twist down in September as car output fell 3.1pc and overall manufacturing slid 1pc, far worse than expectations.

The shock data comes as the yield curve on euro-zone bonds turned negative for the first time since 2000, flashing a warning signal that has often preceded recessions. France's sudden downturn comes amid signs of flagging growth across the euro-zone following a brief burst of energy this year. Germany and Italy both face fiscal austerity packages in 2007.

Alexander Law, an economist at Xerfi, said France's booming growth this summer was an illusion driven by de-stocking.

Jean Michel-Six, an economist of Standard & Poor's, said French exports were suffering a loss of global market share due to high labour costs and the strong euro. "I am afraid that loss of exports is the major factor behind this bad surprise, and Airbus may be starting to play a role. Airbus deliveries generate $1.5bn (£1.01bn) a month for French exports and this is now in question. There had originally been plans to deliver 25 of the A380 jumbos in 2007 and instead there will be just one."

Prime minister Dominique de Villepin was caught flat-footed by the data after playing up the French recovery "miracle" earlier this year. "Sadly we're seeing a pause in growth but this should inspire us to yet more grit and determination," he said yesterday.

There is almost no chance of France meeting the growth rate of 2.5pc predicted by the European Commission for 2007. The European Central Bank is expected to press ahead next month with a quarter point rise in interest rates to 3.5pc, arguing excess credit has swamped the system with excess liquidity.

Jean-Claude Trichet, the ECB's chairman, said this week the ECB was built on a legacy of strict monetary discipline inherited from the Bundesbank that would not be abandoned "lightly".

Resistance is already emerging from a powerful bloc of EU finance ministers threatening to use their Maastricht Treaty powers to clip the wings of the bank if it fails to support growt

[Leisler]

[Moonman62]

I'm surprised car output is down considering how many are needed to replace the ones torched by jihad. Perhaps imports burn better.

[Leisler]

[John Valentine]

...hopes that Europe would take over as world's growth engine as America slows.

Hey, Ambrose, what's this "as America slows" crap? You ought to know better.

[Moonman62]

The shock data comes as the yield curve on euro-zone bonds turned negative for the first time since 2000, flashing a warning signal that has often preceded recessions.

Yet another sign that central bankers around the world are clueless when it comes to the actual cause of inflation.

[kinoxi]

Growth sank to zero

[EagleUSA]

I can see Chirac saying now..."Don't worry, we will make it all up with weapons and nuclear material sales to NK and Iran...."

[syriacus]

America slows

Just a prediction for what will happen under the dems.

[Moonman62]

Yet their central bank is keeping interest rates too high.

[kinoxi]

The ECB is quite unforgiving IMO.

[centurion316]

Coming soon to a neighborhood near you. Remember, the Democrats admire the French above all others as an example of the perfect Socialist government, economy, and cultural society.

I'm sure Nancy and Harry are hard at work this weekend figuring how they can put an end to this pesky expanding economy that we have been cursed with.

[spokeshave]

What they need are 34 hour work weeks to soak up the unemployed.

[kinoxi]

What they need are 34 hour work weeks to soak up the unemployed.

I could be mistaken but I thought I read some time back that unemployed mimes were eligible for unemployment benefits in France.

[Moonman62]

Of course. It's not like any employees of the ECB will have to suffer or be held accountable. They are just like the Federal Reserve. As long as they don't blame the government for inflation, they can get away with anything.

[aculeus]

I posted this very informative article to News but it was transferred to Chat and then ignored.


http://www.freerepublic.com/focus/f-chat/1735180/posts

[lowbuck]

Thanks for the post. On a related note is this post from earlier about some of the causes of the troubles at Airbus.

Try this thread

http://www.freerepublic.com/focus/f-news/1736474/posts

[finnigan2]

I saw a Discovery Channel special last week on the completion of the worlds longest and highest suspension road that was recently opened in southern France. It is a true marvel and spans an entire river valley, that is hundreds of feet below. When the road was officially opened, Chirac was there to rave on about French ingenuity, drive, imagination, etc., now setting the world an example, yada, yada.
The program then went on to comment dryly that the roads design firm was from England and most of it's construction was managed by Italians.
The French are living in some "belle epoque" fairy land where they are still the admiration of all the world.

[Leisler]

You have to wonder when Boeing which basically bought up all the commercial aircraft design talent in the US, was reluctant to undertake a 380 project.

Now it looks like Airbus is in a bad box of it's own making. High cost, slow service, shortages of high talent professionals. Kind of like mainland Europe in general.

I do not see the ruinous dynamics changing in Europe until they hit the wall or it all collapses. Too much of the so called leadership, elite, and population are either economically or psychologically or both tied to the present path.

Generally the US has the labor, flexibility, fairly rational law and taxes, immense and cheap finance. Asia ditto. Europe? All I see them doing is becoming more and more rigid, obstinate and in deeper denial.
This working explanation of Europe explains a lot of their foreign policy, such that it is.

[Neidermeyer]

Time to start doing some research , the Euro will be back to par with the dollar within 18 months,, great opportunities will abound for investors who get ahead of the curve..

[Leisler]

I saw that too. By the way that bridge cost something like 1/3 of a typical state or federal run bridge would cost in the US. Bridge and road projects in the US are now secondary to their need. They are in fact employment busy work for decades of Corps of Engineers, Federal and State Transportation and other agencies. Throw in union labor for the Democrats and Bechtel and other engineering firms for the Republicans.

These projects should just have objectives and then be put out to bid. They'd be done in a couple of years, at better quality and 1/3 the costs. Take Boston's Big Dig. If it was a private toll project it would never been built because there isn't an economic demand to support the costs. But again that isn't the reason it was done. The true reason was to move 15 billion dollars, and counting, money from taxpayers into the pockets of Democrats and Republicans. In that case it was an immensely successful project. Since the Dig will have to be paid off in the future, another way to look at is that it was a way to steal from young people in the future. You could think of it as economic pedophilia. ( Maybe someone can think of a new word?)