The eurozone was counting on France to boost the growth figures for fourth quarter, but now France itself is threatened with recession and losing its position as a shield

Emmanuel Ferry Exane

Most analysts had hoped for positive quarterly growth, with some tipping the annual rate as high as 3%.

While Germany, by far Europe's biggest economy, is effectively in recession, previously buoyant growth in France was seen as a vital counterbalance.

"The eurozone was counting on France to boost the growth figures for fourth quarter, but now France itself is threatened with recession and losing its position as a shield," said Emmanuel Ferry, an economist at Exane.

"France is no longer protected from the global economic slowdown."

France stumbles

The fourth-quarter performance was France's first quarterly GDP contraction since the fourth quarter of 1996.

In the past couple of years, France has grown at a relatively lively pace, just above the European average and in line with the robust British economy.

French GDP grew at 3.6% in 2000, for example.

And in the months after 11 September, it was felt that France - less reliant on the US market than some of its neighbours - might be able to weather the storm.

Friday's figures will have made grim reading for Prime Minister Lionel Jospin, who announced this week that he would challenge conservative President Jacques Chirac in presidential elections in April.

Reasons to be cheerful

The quarterly contraction was not a surprise to everyone, however.

Little-noticed gloomy consumer sentiment figures late last year indicated that French consumers, a key motor of the economy, were tightening their belts.

And most feel that the end of last year represented the trough of this economic cycle; most other economies have already started to experience a slight recovery this year.

And seasonal factors such as the introduction of euro cash could help give France a modest boost.

France's finance ministry has yet to give its formal reaction to the latest GDP figures, but one official pointed out that a 2% annual growth rate was still twice as strong as the US, and three times better than Germany.