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French Consumer Confidence Grows Slightly in First Quarter


French consumer confidence strengthened in June as new President Nicolas Sarkozy pushed forward a tax relief plan and as unemployment fell to its lowest levels in 25 years, national statistics bureau Insee said Friday.

The French economy also grew 0.5% in the first quarter of 2007 from the previous quarter, according to final data from Insee. The gross domestic product of Europe's third-largest economy increased 1.9% compared with the first quarter of last year.

Insee's consumer confidence index rose to -12 in June from -14 in May, against market expectations for a reading of -15. In May, consumer confidence posted its biggest rise in 10 years.

On Thursday, the Finance Ministry said unemployment dropped in May to 8.1% from 8.2% in April, its lowest level in about 25 years.

Besides his tax-relief plan, Sarkozy has promised to cut payroll charges on extra working hours beyond the 35-hour-per-week ceiling, offering employees an incentive to "work more to earn more money."

A study by the Organization for Economic Cooperation and Development published Wednesday backed the government's program, as it urged France to reduce unemployment and get more people into the labor market in order to increase the sustainability of its social insurance system and boost economic growth.

Insee said earlier in June that economic expansion is likely to accelerate from the second quarter after a dull first quarter and reach a 2.1% rate for all of 2007, as the global environment is set to improve and consumer spending is expected to bounce back.

Insee said French growth in 2007 will be similar to 2006, when it reached 2.2%, but lower than the euro-zone average for the second year in a row.

Last month, the Organization for Economic Cooperation and Development forecast France's economy would grow 2.2% both this year and in 2008.