France's Hollande points to economic recovery, urges optimism

PARIS (REUTERS) - French President Francois Hollande said Europe's second-largest economy was recovering and tried to fight deepening pessimism in an interview on Sunday, two days after ratings agency Fitch stripped the country of its last top-notch credit rating.

He urged the French to be more positive, highlighting a slight rebound in industrial output data, a bump in consumer spending and an improved forecast from France's central bank for growth in the second quarter.

"We must not succumb to self-criticism," President Hollande told France 2 TV in a 30-minute live Bastille Day interview in the garden of the Elysee presidential palace.

"For years we have been the most pessimistic country in Europe, in the world even. There are countries at war that are more optimistic than we are."

Commentators have underscored the mismatch between France's economic reality and the pessimism of its people, such as in a New York Times op-ed this week titled "France's Glorious Malaise".

"The recovery is here... The second half (of 2013) will be better than the first," President Hollande said.

Nevertheless, France's gross domestic product has been flat and unemployment is at a 14-year high, weighing on President Hollande's approval rating despite his efforts to fix the economy with tax credits for businesses and subsidised jobs.

Adding to France's woes, Fitch cut the country's credit rating to AA-plus on Friday from its top AAA rating, citing concerns about its budget deficits, high joblessness and weak economic output.

Economists polled by Reuters on July 4-9 expected job losses to continue and the economy to shrink by 0.3 per cent in 2013.

That is below a government forecast for 0.1 per cent growth this year.

Following the derailing of a train on Friday that killed six people, President Hollande pledged to increase investment in non-high-speed train lines.

He also used the interview to try to put an end to a raucous debate over whether to lift a ban on exploring for shale gas in France, saying there would be no such exploration while he is in office.

He also brushed aside recommendations from his own Socialist Party on an upcoming reform of the pension system. It advised hiking contribution rates rather than lengthening the duration of contributions - which is his preferred policy.

"I've never hidden my position," he said, referring to the option of lengthening contribution rates beyond 41.5 years currently. "Everyone is going to have to make an effort."

Two weeks after firing his energy minister for criticising the budget, President Hollande warned his cabinet to show unity or risk failure, reiterating that spending would not rise in 2014, although he did not rule out tax rises.

He also played down his rock-bottom approval ratings - a poll in June showed just 26 per cent of those interviewed were satisfied with his performance.

"I'm not looking to be popular. My duty is higher than that," he said.

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