Economic blues for France

The French economy shrank by 0.3% in the second quarter, indicating negative growth across the euro zone's three biggest economies in the April to June period.

The figure, announced by national statistics office INSEE, undershot forecasts and is not good news for the French government as it prepares next year's budget.

It followed announcements in Germany and Italy that their economies contracted in the first and second quarters of this year, so they - unlike France - were in technical recession.

This news puts pressure on the centre-right government as it prepares its 2004 budget bill, due to be presented in mid-September.

A Finance Ministry spokesperson said the contraction was a blip and that there were signs of an upturn in the euro zone economy.

"The second quarter was exceptional due to the fallout from the war in Iraq, the strikes (in France) and the international economic situation, with several of our partners in recession," the spokesperson said. "This is not representative of a trend."

European Central Bank Executive Board Member Eugenio Domingo Solans also said that recent data suggested the euro zone economy was on track for recovery later in the year.