With a nationwide strike looming and a zero growth 3Q4, the French economy shuffles into the new year.

FRENCH GLUM ABOUT ECONOMIC FUTURE

French households were less optimistic about their future economic prospects in December than in November, the national statistics institute INSEE [Institut National de la Statistique et des Etudes Economiques] reported Thursday.

It said its index measuring household sentiment fell to minus 25 points from minus 23 in November, its third straight monthly decline.

At Natexis-Banques Populaires, analyst Marc Touati* said French households are pessimistic about chances for an improvement in the job market and fear a clear decline in the standard of living in France.

"A logical consequence of these fears is that households say they are more inclined to boost savings and less inclined to consume."

* M. Touati has other interesting things to say elsewhere.

FRANCE AND GERMANY LIKELY TO MISS GROWTH TARGETS

France and Germany, the two biggest economies in the eurozone and accounting for half its output, are almost certain not to meet their growth targets again in 2005 as unemployment and poor consumer spending continue to depress their potential.

[In France] consumer spending had, until the second half of last year, buoyed the overall economy. Yesterday's revised Insee figures showed consumer spending dropped in the third quarter of 2004 by 0.2%, with Nicholas Claquin, an economist at CCF, telling Reuters that unemployment, at close to 10%, was weighing down on consumption. "We will see a bit of a rebound in the fourth quarter but the trend for 2005 is a slowdown."

Wait. Not more than two months ago Finance Minister Hervé Gaymard pronounced France's 2005 growth target [scil., 2.5%] "credible". What happened?

Nothing. While M. Gaymard pronounced, economists were busy revising their forecasts downward to reflect the facts reported by the French government itself. M. Gaymard's boosterism is his government's response to stubborn economic realities. "Credible"? Dear reader, it is but a word, flimsier than Kleenex and as disposable.

Here is Jack's take on all the bad news:

'CONFIDENT' CHIRAC PROMISES MORE TAX CUTS

In a New Year's presentation at the Elysee Palace, Chirac also said the minimum wage would rise at least five percent from July 1 and expressed optimism about France's future in the face of high oil prices and the "excessive weakness" of the dollar.

"I am confident in the growth dynamic of our country for the months and years to come," Chirac said.

He said income tax reductions would resume next year after a pause in 2005 as part of an initiative to ease the tax buden on French wage earners by 33 percent between 2002 and 2007.

Chirac promised a reform of the professional tax as well as new tax measures to encourage long-term investment in stock markets.

"I am asking the government to study in particular a fiscal adjustment, to tax more heavily the purchase of a share in order to sell it quickly, but to ease taxes for the long-term investor," Chirac said.

That latter measure is the sort of brillance, like France's wealth and exit taxes, that has investment and talent flying elsewhere. Of course tax reform cannot come soon enough to France. She continues to hold the top spot on the Forbes Tax Misery Index with a top progressive individual income tax rate of slightly below 50% and an additional flat tax of 8% or 10%. And the Index of Economic Freedom classifies France's economy as "mostly free", ranking it 44th out of 155 nations. (Hat tip: E-Nough!) All the 10 new EU members out-rank France except Solvenia (45). The only other EU nation to rank worse than France is Greece (59). Why does this matter? Because France ranks herself as a premier economic engine of Europa.

But in France things are never so bad that a government official -- sometime the top dog himself -- can't be found who will pronounce everything aces.

FRANCE CAN CUT PUBLIC DEFICIT PROMISES CHIRAC

French President Jacques Chirac insisted on Friday that France was capable of respecting promises to the European Union to reduce budget overspending.

He added: "We did the right thing in resisting pressure from those who recommended an excessively restrictive budget policy when we were rather at the bottom of the wave because growth was inadequate."

Scilicet: Mr. Chirac believes France was correct not to honor her legal obligations under the Stability and Growth Pact, a treaty largely of France's and Germany's own making.

[All emphases added.]