France reveals €26bn stimulus package to boost economy

”France

The euro zone’s second largest economy has unveiled a €26 billion (£23.5 billion) stimulus package in a bid to boost its economy and fight off the economic downturn.

It is hoped that the plan will produce economic growth of around 1.3%.

Francois Fillon, France’s Prime Minister, unveiled the package earlier today which is to be divided into three sections:

€11 billion is to help businesses boost their cash flows, while a further €11 billion will be provided for direct state investment and the remaining €4 billion will be provided to improve rail infrastructure, postal service and energy services.

However, Finance Minister Christine Lagarde said the package would not be enough to offset the impact of the global economic downturn and added that France would enter recession “at some point”.

The euro zone, as a whole, entered recession in November, while Germany and Spain are both in recession.

Furthermore, prior to the announcement of the stimulus package, Ms Lagarde said that official figures due out today are to show a rise in unemployment of around 45,000 workers in December 2008.

However, on a positive note, some analysts believe the economic downturn may be easing slightly after figures today revealed that manufacturing output in France, along with that in the euro zone as a whole, contracted at a slower rate in January compared with December.

In related news, official figures showed that the UK manufacturing sector slowed during January but was a marginal improvement on December.

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