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Last Updated: Friday, 12 August 2005, 11:14 GMT 12:14 UK
French economy grinds to a halt
French shopper at a market stall
Weak demand from French consumers is hitting the economy
French economic growth weakened in the three months to June, mirroring a slowdown across the 12-nation eurozone.

France's economy grew by 0.1% in the second quarter, compared to 0.4% in the first three months of the year, according to government figures.

The slowdown was sharper than expected, and comes as France struggles to deal with weakening consumer demand.

Figures released on Thursday showed that overall eurozone growth slowed to 0.3% in the second quarter, from 0.5%.

Forecast cut

The latest quarterly French gross domestic product data was the worst since the third quarter of 2004.

France's finance minister, Thierry Breton, has already been forced to cut his forecast for annual growth to a maximum of 2%, from 2.5%.

However, analysts think even this figure is optimistic.

"We expect a little pick-up in growth in the second half of the year, with 2005 overall growth coming in around 1.6%," said economist Jean-Louis Mourier at Aurel Leven.

Despite the country's sluggish GDP performance, France still managed to outpace the eurozone's biggest economy, Germany, which registered zero growth during the same period.

Unemployment fears

The slowing economy is bad news for the French prime minister Dominique Villepin, who has pledged to make reducing unemployment the government's top priority.

His plans to boost jobs by making it easy to sack workers is already under attack from the unions, who plan to challenge it in court.

Weak consumer demand is holding back the French economy but is helping to keep inflation in check.

French consumer prices fell 0.2% in July from the previous month, although economists had expected the monthly figure to remain unchanged.

Over the whole year, prices were up just 1.8% on the previous year.

The weak growth and low inflation will boost calls for the European central bank to cut interest rates, which have been held steady at 2% for the last two years.

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