French strikes to affect already weakened economy: analysts

Wed Jun 11, 2:04 PM ET

PARIS (AFP) - Although the strikes that have hit France over the last three weeks should have only a limited economic impact, they are yet another shock to the country's shaken economy, analysts said.

Workers, primarily in the public sector, have been striking regularly for three weeks against planned government reforms to the pension system.

Credit Agricole economist Anne Beaudu warned the strikes "could especially have an impact on consumer confidence and spending".

With companies currently holding back from making investments, consumer spending has become the main driving force behind France's meagre economic growth.

Societe Generale economist Olivier Gasnier said recent television images of Paris police firing tear gas and water cannons to disperse hundreds of masked protestors could rattle consumers already shaken by rising unemployment.

"The radicalisation of the strikes, the images of violence like those seen on Tuesday evening in Paris could disturb consumers' peace of mind," he said.

Services and industry might not have been paralysed by the strikes but they have not escaped unscathed.

According to the Paris Chamber of Commerce and Industry, Parisian department stores, already hit by a drop in tourism, saw their sales fall by about 10 percent in May in comparison with May 2002 because of public transport strikes.

Credit Lyonnais economist Olivier Eleure said the economic effect would be borne primarily by the public sector.

The head of the national rail company SNCF, Louis Gallois, said one day of strikes cost his company 20 million euros (23.5 million dollars) and the state-owned Paris public transport company RATP has estimated that it is losing one million euros per day of strikes.

Although the strikes are so far not holding up supply chains, CDC Ixis Capital Markets economist Laure Maillard said French industrial groups were "getting worried about drops in their domestic orders".

French statistics office INSEE declined to comment on what impact the strikes might have on the economy ahead of the publication next week of its regular study of the French economy.

The widespread strikes that affected France for more than a month in 1995 are thought to have shave 0.3 percentage points off economic growth in the last quarter of the year.

Some analysts predicted the current wave of strikes were not having such a large impact on the economy.

Societe Generale's Gasnier said: "We are not in the same situation as in 1995 and we should lose about 0.1 percentage point as a result of the strikes."


But CDC Ixis' Maillard pointed out: "It's another shock which the (French) economy does not need and which lengthens an already long list of shocks."


Data from INSEE showed last month that the economy narrowly escaped recession in the first quarter of 2003, when it grew 0.3 percent after contracting 0.1 percent in fourth quarter of 2002.

French growth has been slack amid the threat of war in Iraq, high oil prices early in the year, and weakness in the economies of major trade partners, notably Germany.

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