Moody's Analytics France Outlook Q2 2014

France Outlook: Bank Lending Stumbles Forward • France’s growth stalled in the first quarter of 2014 but should pick up through the year. • French banks are reluctant to lend to the private sector. • Bankruptcies, credit rationing, and exposure to peripheral countries are the financial sector's biggest concerns. Lending in France continues to falter. French banks are reluctant to lend to the private sector, although the saving rate of French households is elevated and the pool of savings is large. Without lines of credit, many small and medium-size enterprises in France have cash-flow problems, and the number of bankruptcies remains high. Economy slowly picks up France's GDP stalled q/q in the three months to March after increasing 0.3% in the previous quarter. Household consumption, fixed investment and net exports dragged on growth, while inventories and government consumption contributed. The French economy will pick up through 2014. Despite an income tax rate near the highest in Europe and a savings rate of 15.7%—roughly 2.7 percentage points above the euro zone average—French household spending is expected to improve through 2014, despite stalling in the first quarter. The main driver should be increasing consumer confidence, especially as the government has not announced further tax hikes and will now focus on spending cuts and saving plans in public administration. Meanwhile, GDP growth in the euro zone, the U.K.