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French strikes and fuel shortages eat into economy

25 October 2010 18:10 (UTC +04:00)

Baku â€“ APA. Fuel shortages persisted at petrol pumps across France on Monday as the government said weeks of striking against an unpopular pension reform were costing the country 200-400 million euros per day, APA reports quoting â€œReutersâ€.
A quarter of French petrol stations were short or out of fuel, and workers at seven of France’s 12 refineries voted to continue striking for the next 24 hours. Two refineries were expected to vote to end two-week-old strikes.
Economy Minister Christine Lagarde said the strikes against the government’s plan for a two-year rise in the retirement age were taking a toll on businesses and damaging France’s image at a fragile time for the second-largest economy in Europe.
"We can make an estimate -- the bracket is wide, between 200 and 400 million euros per day," Lagarde told Europe 1 radio, just back from a G20 finance ministers meeting in South Korea.
"There is also a moral hazard: the attractiveness of the (French) territory is in the balance when you see images like these," she said.
Television images of burning barricades at blockaded oil refineries and fuel depots, and clashes between rioters and police on the fringes of street protests, have embarrassed President Nicolas Sarkozy as he tries to show the world France can take concrete steps to trim its deficit.
Unions have called two further days of nationwide protest on October 28 and November 6, set on continuing their struggle even after the Senate approved the bill on Friday. The law is due to be ratified this week.
Over the weekend, Energy Minister Jean-Louis Borloo sought to reassure people ahead of a 12-day school holiday by saying the fuel situation would return to normal "within days," although he declined to offer a precise time frame.
Sarkozy -- whose popularity rating is at rock-bottom 18 months before the next presidential election -- has sent in police to break blockades at fuel depots, tapped into strategic reserves and boosted fuel imports from abroad.
The government will also crack down on petrol station managers who have tried to profit from the shortage by hiking prices. Police have led some 2,000 checks and charged 40 people for "blatant abuse," Lagarde said.
ECONOMIC IMPACT
Small businesses still fragile from the recession have fared worst during weeks of striking against the reform. France’s top industrial group MEDEF requested on Sunday a moratorium on social charges for hard-hit companies.
"We came out of the crisis in fairly good condition and we should not be slowing the rebound with (strike) action that is bad for the French economy and very bad for small businesses," Lagarde said, adding that MEDEF’s request would be examined on a case-by-case basis.
Economists were divided over the cost of the strikes.
"I’m not sure what the finance ministry estimate takes into account, but the estimate does seem quite high with regard to previous strikes," said Barclays economist Laurence Boone.
"We came out of the crisis in fairly good shape and we should not be slowing the rebound with (strike) action that is bad for the French economy and very bad for small businesses," Lagarde said, adding MEDEF’s request would be examined on a case-by-case basis.
Economists were divided over the cost of the strikes.
"I’m not sure what the finance ministry estimate takes into account, but the estimate does seem quite high with regard to previous strikes," said Barclays economist Laurence Boone.
She said that while refinery blockades may have inflated the cost of the strikes -- a 2007 strike lasting 10 days cost 500 million euros, according to France’s Statistics office -- they were not likely to significantly reduce quarterly growth.
Yet Marc Touati, an economist at Global Equities, said the government cost estimate "seemed reasonable."
"The situation is dragging on," he said. "We had a small recovery going but this could reverse it ... There is also the problem of international credibility which can be very painful."