France's Sarkozy returns to face economic woes

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French President Nicolas Sarkozy returned from his summer break on Monday to a sluggish economy, a court decision to scrap a tax break he promised and a scandal over a pedophile who says a prison doctor gave him Viagra.

Sarkozy has been riding a wave of popularity since he was elected in May, pushing through a package of fiscal measures to help homeowners and workers on overtime, toughening sentencing for criminals and giving universities more independence.

But there are signs that the honeymoon is coming to an end and that he could face a much tougher autumn.

Economic growth and job creation stumbled in the second quarter, a top court has overturned a mortgage tax break for some homeowners and the case of the pedophile who reoffended while on Viagra has raised questions over the new criminal law.

Economic and financial clouds oveshadow Sarkozy's return, said a headline on the front page of Les Echos newspaper, and opposition politicians have attacked his economic record.

Sarkozy response was to call three ministerial meetings on Monday, his first day back at work after a two-week break in a luxury villa in the United States, to discuss the economy, immigration and dangerous criminals.

GOVERNMENT STICKING TO GROWTH FORECAST

The participants discussed ways to boost investment and to respond to the Constitutional court decision concerning mortgage interest, spokesman David Martinon said after the meeting on the economy.

Economy Minister Christine Lagarde has said the government is sticking to its 2.25 percent growth forecast for 2007, despite the second quarter growth of just 0.3 percent, provoking criticism from opposition politicians.

When the economy minister...says that the French economy is doing well, the minister is either missing some information... or there is a lack of transparency, Socialist leader Francois Hollande said on Saturday.

One of the first bills expected to come before parliament when it returns in the autumn aims to toughen immigration rules.

Sarkozy also has plans for pension reform for the public sector and a new labor contract. Both of these are likely to be unpopular with unions already angry about public sector job cuts and new rules on transport service during strikes.

Communist Party leader Marie-George Buffet on Monday called for a large popular gathering in the autumn to discuss Sarkozy's reactionary policies.

But the main opposition parties are still having trouble finding a coherent message after the election and have been taken by surprise by Sarkozy's success in continuing to dominate the headlines during the traditional summer break.

The Socialist Party is totally destabilized, not knowing how to respond, said Gael Sliman of pollster BVA. The other strong point of (Sarkozy's) 100 days is that he manages to dictate the news every time.

(Additional reporting by Kerstin Gehmlich and Gerard Bon)

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