PARIS (AP) -- The International Monetary Fund has warned that the French economy, the eurozone's second-largest, is still vulnerable to a downturn because of its eroding share of the export market and low profit margins.

The IMF's executive board said Friday that France has done some work fixing its long-term economic problems, but the country's companies are at a disadvantage when it comes to other European nations, especially for investment and innovation. The statement blamed the problem in large part on labor costs and the service industry's ability to compete.

France has announced it will reduce employers' contributions to social security and expects to reduce its budget deficit. But the IMF statement suggested the government's forecast was overly optimistic and that France will have to do more, faster to stay competitive.

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