Facing Uncertainty, French Firms Cut Back on Investments

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The French economy is facing a growing handicap as it struggles to create jobs and crawl out of recession: Despite low interest rates, companies and entrepreneurs are cutting back on their investments. They're delaying plans to expand existing factories, and canceling plans to build new ones, The Wall Street Journal reported. Behind the reluctance is a difficult combination. Higher taxes and cheaper foreign competition have pushed margins for French companies down to their lowest level since 1985—reducing companies' ability to stomach risk. At the same time, French business leaders say the challenges from unpredictable tax rates and ever-changing French red tape are rising. Anxieties are rising. Investment by nonfinancial companies in the euro-zone's second-largest economy has contracted every quarter since the beginning of 2012. A recent survey by French statistics agency Insee showed French businesses in manufacturing expect to cut investment by 4% this year, while in January they expected to keep investment at the same level as 2012. Read more. (Subscription required.)