FRANCE is in a state of economic emergency, President Francois Hollande announced today, amid fears the worsening financial situation in Germany could topple the entire eurozone.
Investor sentiment plunged as the socialist leader announced unemployment in France has surged to an 18-year high of 10.6 per cent – plunging the country into a new economic crisis.
It comes as Germany faces the most difficult start to a year in recent memory. Its own industrial production growth has slipped to ZERO per cent and customer confidence has plummeted in a catalogue of disasters for Chancellor Angela Merkel.
An increasingly desperate Mr Hollande has now said he will PAY French employers to hire people in a bid to boost jobs as he sought to restore confidence and said that it was time to address the country’s “broken” economic model.
He said: “Our country has been faced with structural unemployment for two to three decades and this requires that creating jobs becomes our one and only fight.”
France was facing an “uncertain economic climate and persistent unemployment” and there was an “economic and social emergency”, he said.
Firms will get €2,000 (£1,500) when they employ young, unemployed people for at least six months.
At the same time, the beleagured French leader hopes to make it easier for firms to fire people by putting a cap on the amount dismissed workers can claim in labour courts.
The plans will cost €2billion (£1.5bn) and are part of Mr Hollande’s attempt to secure his chances of re-election when the country votes in the presidential election next year.
Germany and France are the two biggest economies in the eurozone. Germany, which has a GDP of $3.4bn and France, with $2.4bn, are two of the six largest economies in the world.
Experts have warned that if the economies of both nations crumble it would trigger a domino effect which would bring the entire eurozone crashing down and severely damage the global economy.
Peter Lundgreen, head of investment firm Lundgreen’s capital said: “German exporters are feeling the pain from the slowdown in business investments in many emerging market countries, as commodity prices have tumbled.”
Germany’s industrial output has helped underpin the country’s economic growth – but these numbers have been worryingly undershooting expectations for months.
Domestic consumption had powered the country’s growth over the past year but consumer confidence has now been falling since June last year, which indicates that consumption is set to fall too, Mr Lundgreen added.
Meanwhile in France, the country’s economy has struggled with low output and stagnant growth ever since the socialist leader was first elected in 2012.
Mr Hollande sought to reassure voters that France’s 35-hour working week is not under threat, but wants firms to hire more young people from troubled suburbs that are seen as potential hotbeds for terrorism and crime.
He added: “The time has come for us to build the economic and social model for tomorrow.”
Mr Hollande is fighting against the rising popularity of far right parties that want to France to quit the eurozone and re-instate borders with Europe in a bid to tackle the problem.
The Front National, led by Marine Le Pe, won the opening round of French regional elections in December.
As well as economic failure, Mr Hollande has been criticised for his handling of the country’s security after the Charlie Hebdo massacres and the more recent terrorist atrocities in Paris.
Earlier this week Angela Merkel admitted that Germany could fail to balance its books this year as it contends with the costs of the refugee crisis.
And today around 40 rebels from German Chancellor Angela Merkel’s conservative party sent her a letter demanding a change to her liberal refugee policy.
Amid collapsing poll numbers poll numbers about the country’s ability to handle the influx, which brought nearly 1.1 million newcomers last year, the Christian Democratic Union (CDU) lawmakers said Merkel must face up to reality.
They wrote: “In light of the developments in recent months, we can no longer speak of a great challenge — we are on the verge of our country being overwhelmed.”
It was the largest single expression of dissent by members of Merkel’s party since the refugee crisis hit Germany in September. The CDU has 256 seats in the Bundestag lower house of parliament.
“We do not want to divide the CDU parliamentary group. We are only asking for the law to be applied,” one of the authors of the letter, Christian von Stetten, told AFP.
The developments in France and Germany came as analysts warned a global recession is now more likely than at any time since the financial crisis.
Francesco Garzarelli, co-head of global macro and markets at Goldman Sachs, said: “Things could spiral out of control.
“We could be underestimating the severity of the downturn in China and the spillover effects.”