France’s hopes of cutting its ballooning public deficit took a blow Thursday as new figures revealed that the country’s flagging economy remained at a standstill in the second quarter.

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For the second quarter in a row, France’s gross domestic product saw zero growth in the three months to July, according to figures from national statistics office INSEE.

The figures prompted Finance Minister Michel Sapin to slash the government's forecast for growth in 2014 to "around 0.5 percent", compared with a previous projection of 1.0 percent.

The German economy suffered a surprise contraction in the second quarter, its first in more than a year, as foreign trade and investment, particularly in the construction sector, weighed on growth in Europe’s largest economy. The data, combined with weakness in other large countries like Italy, is likely to raise new doubts about the recovery in the eurozone, which is struggling to emerge from the deep financial crisis that nearly tore it apart. Germany’s Federal Statistics Office said the economy shrank by 0.2 percent between April and June. It had been forecast to stagnate, according to a Reuters poll. In a further blow, the Statistics Office revised down the first quarter growth figure to 0.7 percent, from a previously reported expansion of 0.8 percent. (REUTERS)

"With zero growth in the second quarter, thereby extending the stagnation we saw in the first, our country is slowing down and will not achieve the one-percent growth observers were predicting three months ago," Sapin wrote in an opinion article in the daily Le Monde.

"This year, growth in France will be around 0.5 percent, and there is nothing that would allow us to forecast, at the moment, that growth in 2015 will be much above 1.0 percent," he added.

EU Deficit target at risk

The lack of growth means France’s public deficit will now top 4 percent of GDP in 2014, missing a government target of 3.8 percent, said Sapin.

It also increases the possibility France could miss a key 2015 EU deficit target, leaving it at risk of sanctions from the 28-nation bloc.

Although he did not specifically comment on the 2015 target – when France’s public deficit is due to come into line with the EU’s 3 percent of GDP cap – Sapin said France would cut its deficit “at an appropriate pace”.

“The truth is that, as a direct consequence of sluggish growth and insufficient inflation, France will not meet its public deficit target this year despite a complete control of spending,” Sapin wrote in the op-ed.

Stressing that France was not alone in the eurozone with a weaker-than-expected economy, Sapin said “European policies must be refocused by adapting the pace of deficit reduction to the current economic environment”.

Many in the European Union have voiced exasperation over the past years at France’s repeated failure to meet fiscal targets and have asked for deeper reforms.

The country has already benefited from a two-year reprieve to meet the 2015 target.

Sapin said the government would press ahead with a 50-billion euro spending cut plan for 2015-2017, which will include a 21-billion euro reduction in spending next year.

(FRANCE 24 with AFP, REUTERS)

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