France's economy contracted by 0.1 percent in third quarter due to weakened exports and lagging business investment, official data showed on Thursday, dealing a further blow to unpopular Socialist President Francois Hollande.
The drop comes after the economy grew by an unexpected 0.5 percent during the second quarter, pulling the eurozone's second-largest economy out of a shallow recession.
The contraction for July to September stemmed from a 0.6 percent drop in business investment and a 1.5 percent slide in exports, said the national statistics agency INSEE.
The Socialist government, struggling with rising job losses and a mounting deficit, was quick to dismiss the bad news.
"This is not a recession, it is not an indication of decline," Finance Minister Pierre Moscovici told French radio moments after the figures were released.
The figures come a day after a European Commission report found that Germany and 15 other member states – including France and non-euro Britain – had "imbalances" on a range of indicators from debt to trade which need attention before they become serious problems.
Struggling France, faced with very slow growth, high debt and a high tax regime was put on notice with Italy and Hungary to take "decisive policy action" between now and May, when the findings will be reviewed.
The Commission found them at fault in areas ranging from debt to pensions planning.
Mindful of the sensitivity of taking member states to task over economic policy, Barroso insisted "it is is not about the EU running economies in place of national governments."
Rather it is about opening a new phase of "bolder" cross-border action to produce growth and jobs, "ensuring that what is good for individual states is good also for the EU."