France is set to revise down its target for growth this year, Finance Minister Pierre Moscovici signalled on Thursday.
But he played down any extra austerity to meet deficit targets after the economy showed zero growth last year.
And he alluded to a possibility that the European Union might allow France a delay on the deficit.
The economy shrank by 0.3 percent in the fourth quarter of 2012 and growth was zero for the whole year, data from the statistics institute INSEE showed.
Growth is critical to the French economy because it raises tax revenues and reduces some welfare spending.
The latest data puts the government in a dilemma over a commitment to the European Union to cut its public deficit to within the ceiling of 3.0-percent of output this year as the eurozone, struggling as a whole with recession, fights its way out of the debt crisis.
The zero growth in France in 2012, as reported by the national statistics agency INSEE on Thursday, is a sharp slowdown from growth of 1.7 percent in 2011.
Finance Minister Pierre Moscovici acknowledged that the government would now have to rethink its forecast for growth this year of 0.8 percent.
“We note that the figure for 2012 is not good, around zero, and so we also know that growth for 2013 will have to be re-thought,” he told broadcaster France 2.
Asked if this meant that the government would have to introduce austerity measures to meet commitments to the European Union to reduce the public deficit to 3.0 percent of output, he said that it was already taking “serious” action to correct the deficit.
He did not want to “condemn the country to recession,” he said. “I think that we must not add austerity to the difficulties today.”
Moscovici said: “The economic situation is not good, these are worrying figures, negative figures.” But he added, this was also the case “in the whole of Europe” and “this faces us with a collective question.”
He said that the EU might grant France a delay in meeting the 3.0-percent target.
Moscovici said: “If growth worsens unexpectedly, a country can benefit from a delay to correct its excessive deficit, on condition that it had made as agreed all the budget efforts required.”
On Wednesday EU Economic Affairs Commissioner Olli Rehn had alluded to this possibility.
Earlier this week, the independent public accounts court warned that the target for cutting the public deficit to 3.0 percent of output was unrealistic and also said that the government had to focus much more on cutting expenditure.
The right-wing UMP opposition party blamed the government for the latest figures, arguing that it had focused too much on increasing taxes in order to reduce the deficit.
The growth figures for France contrast somewhat with those for Germany, which has the biggest economy in Europe and is the main pillar with France of the eurozone.
At Deutsche Bank, analyst Gilles Moec commented that taking into account a revision of French growth in the first quarter of last year from zero to minus 0.1 percent, output “declined three out of four quarters in 2012.”
He said: “Technically, France was already in recession in the first half of 2012.”
The fact that French gross domestic product fell less in the fourth quarter that Germany’s was “surprising at first glance” but he said that national indicators in the eurozone and particularly in France had become disconnected in 2012.
The French economy was more focused on services than the Germany economy, and this meant it was less volatile and less sensitive to the global economic cycle, he said.
France measures itself against, but lags behind, German economic performance which showed sluggish growth for the first three quarters of the year but shrank by 0.6 percent in the last quarter because problems in the eurozone hit its exports.
However, economists are confident that the dip in Germany is temporary and that the German economy will recover in the first quarter.
In France, however, the climate is gloomy, overhung by regular reports of companies in difficulty and job cuts looming.
France to revise targets after zero 2012 growth: minister
