Crédit Agricole say forget Cyprus and Italy, it's France we should be worried about

While the Eurozone is looking particularly unhealthy with the small island of Cyprus facing an exit from the single currency and Italy without a ruling government, Crédit Agricole warns that France could be the next to topple. That could throw another wrench in the works. The mechanisms of the European Union are already gummed up by a veritable toolbox of problems.

French economic activity fell by 0.3% QoQ in Q412. Above and beyond this recessionary episode, activity is forecast to grow at a far slower rate (0.1% YoY in 2013). The obstacles at work are many and powerful, on a par with the restructuring of the public finances. As a result, businesses will have no choice but to continue adjusting their workforce.

Private consumption is forecast to increase by 0.3% YoY in 2013. This is a very low rate, and far less dynamic than that experienced over the long term (around 2%). Imports will therefore remain low. The contribution to GDP growth from foreign trade should be neutral, as exports have been undermined by a lacklustre European economic environment and the well-known structural difficulties (insufficiently competitive offerings, squeezed export margins, suboptimal geographic and sector specialisation, insufficient SME size, etc).

France is therefore unlikely to generate much growth in 2013 and will remain on the verge of recession. This has prompted the government to postpone the public deficit target of 3% of GDP until 2014.