In France, financial woes trickle down

Turmoil being felt in lifestyles, small businesses

ROUEN, France - Coralie Canterelle, who wields her scissors with easy flair, makes no claim to expertise in the world of high finance. But from the vantage point of her little hair salon in this ancient Normandy town, she said, it has become clear that Europe's financial turmoil is trickling down to put a crimp in the way people live.

"People just don't know where it's going to end," said Canterelle, who has seen a major downturn in her business. "They are afraid. They have stopped buying things. Look out there," she added, gesturing at a nearly empty pedestrian street in the shadow of Rouen's celebrated gothic cathedral. "There's nobody out there."

Across France and much of Western Europe, the bank collapses and market crashes that have worried political leaders for the past month have begun to spread their poison into what experts call the real economy. What seemed at first to be a problem for the rich and the super-rich - and to some people, righteous punishment for greed - has evolved into a threat to ordinary people's livelihoods.

Even in Western Europe, where people are protected by lavish social programs, the horizon is turning grim as economies grind into low gear. After resisting the word "recession" for weeks in an effort to buoy confidence, European leaders have started to use it. They are bracing for more unemployment, diminished tax receipts, and the political trouble that comes with economic hardship.

France's finance minister, Christine Lagarde, acknowledged that the financial crisis has rendered "fragile" even her earlier predictions of a flat economy next year.

"Businesses more or less everywhere, seeing their order books shrink and their profits melt, are pitilessly tracking costs," wrote Gaetan de Capele, an editorialist in the Figaro newspaper in Paris. "The employment market is worsening visibly, and from now on households are very directly touched in their everyday lives."

The auto industry has been hit particularly hard, as car purchases screech to a halt. A Ford transmission factory in Blanquefort, in southwestern France, announced that its workers would have to take 10 weeks off because there was not enough for them to do. A General Motors plant in Strasbourg, near the border with Germany, told its employees they were going to have to take 19 days off before the end of the year.

La Redoute, a leading catalog firm increasingly reliant on the labor-saving Internet, announced 672 layoffs in several customer service centers in northern France.

Against that background, an opinion poll for the financial newspaper Les Echos showed that 59 percent of those queried think that measures taken by President Nicolas Sarkozy and fellow European leaders will not promote a return to economic growth. Almost as many expressed doubt that the government's actions will restore confidence among investors, and 65 percent called on Sarkozy to spend more money to stimulate employment.

The lack of confidence in the economy has built up around the country even though Sarkozy has been at the forefront of efforts to deal with the crisis. His prominent role cast France in a leadership position that has played well in public opinion, boosting his political standing

"Europe must carry the idea of recasting world capitalism," he declared in a speech to the European parliament in Strasbourg. As France's part of the recovery plan, Sarkozy's government announced Monday that it was ready to hand over $14 billion to six of the country's big banks. The objective, his aides said, was to reinforce their capital and their confidence so that loans can start flowing again to businesses that want to invest and consumers who want to buy.

But the poll results, which mirrored comments here in Rouen, suggest people realize that the president's frenetic activity, while it may have helped prevent a financial collapse, has done little to prevent a slowdown in the kinds of economic activities that are part of people's everyday lives.

The 700,000 people who live in Rouen and the surrounding suburbs had not paid close attention to the financial turmoil, residents said, because until now it seemed distant from their lives.

Canterelle, the hairdresser, said that attitude is changing as the slowdown ripples over the city.

Celine Borkowski, of the Laforet real estate agency, said prices have dropped about 10 percent since the crisis erupted. "There are people who want to buy, and there are people who want to sell," she said, "but at the bank, unless you have a big down payment, you can't get a loan."