Warning to France: austerity measures may hurt economy

France's economic recovery is under threat from austerity measures – which could further hike up unemployment, a think tank warned on Friday. Last month the French government proposed a budget with the toughest cuts in 50 years.

Reuters

"The austerity measures will prevent the triggering of a virtuous cycle allowing the French economy to grow at a rate higher than its potential and therefore allowing unemployemnt to fall," reported the OFCE economic research centre of Paris' Sciences Po university.

It expects that the French economy will manage 1.7 percent growth this year, slipping to 1.6 percent in 2011 as austerity measures kick in. Meanwhile the French government forecasts 1.5 percent growth this year 2 percent growth in 2011.

The OFCE said it expected the unemployment rate will rise to 9.7 percent of the workforce at the end of 2011, against 9.4 percent at the end of this year.

"The growth will be less rich in jobs, even destructive in jobs," said economist Eric Heyer in presenting the forecasts.