Economy, France | featured news

Even as the euro zone periphery starts to spy some glimmers of hope, concern is mounting that Germany is drifting apart from other countries at the core of the single currency bloc, notably France.

Moody's Investors Service has downgraded France's government bond rating, citing the country's weak economic growth outlook and its exposure to Europe's economic crisis.

French industrialist Louis Gallois called for a patriotic effort to reverse declining competitiveness through shock therapy as he handed in a review on Monday which the Socialist government commissioned and is now under pressure to heed.

French President Francois Hollande has set himself a deadline to turn around the economy by the end of 2014, but having hamstrung the effort with tax rises to meet deficit targets, economists doubt his growth goals will ever fly.

The euro zone's two largest economies avoided shrinking between April and June, but the resilience of Germany and France wasn't enough to prevent the currency bloc's economy as a whole from falling back into contraction.

French voters are choosing a new parliament Sunday that will determine how far Socialist President Francois Hollande can push for economic stimulus in France and around a debt-burdened, stagnant Europe.

Germany dismissed a French-led call for euro zone nations to issue common bonds, a day before a European Union leaders' summit which investors are looking to for new measures to counter the bloc's debt crisis.

Investors nervous about the changing political winds in Europe initially drove down the euro and sent stock markets falling across the region Monday morning, though markets were bouncing back later in the day following renewed signs of strength in the German economy.

Unemployment rose to 10.9 percent in April, the 11th monthly increase in row, and is likely to add to tension ahead of national elections in Greece and France on Sunday.

Far-rightist Marine Le Pen threw France's presidential race wide open on Sunday by scoring nearly 20 percent in the first round - votes that may determine the runoff between Socialist favorite Francois Hollande and conservative President Nicolas Sarkozy.