The French government Thursday gave up on its budget deficit targets and called for Europe to slacken fiscal discipline as data showed an absence of economic growth in France has shattered President François Hollande's plans.
Gross domestic product growth will be around only 0.5% this year and nothing suggests that France can forecast more than a 1% expansion in 2015, Mr. Sapin said in an editorial published in Le Monde Thursday. The French paper released extracts on its website.
The government had previously forecast 1% growth this year and 1.7% next year.
The French finance minister's reaction came within minutes of the news from national statistics agency Insee that the economy recorded zero growth for the second straight quarter in the period April through June. Economists had expected a slight GDP rise.
"It is better to admit what is than to hope for what won't be," Mr. Sapin said in the editorial.
Weak growth combined with low inflation will drag on tax revenue and swell the size of deficits relative to the size of the economy. France's budget deficit will be over 4% of economic output this year instead of falling to 3.8% from 4.3% last year, the minister said.
The recognition of the economic and financial difficulties facing France is in contrast to Mr. Hollande's optimism as recently as July this year that the economic recovery was on track. The reality is worlds apart from the socialist president's promises when he came to power in May 2012--at the time he said the deficit would be 3% of GDP as soon as 2013.
The shift to resignation from optimism also reopens a rift between France, northern EU countries--in particular Germany--and the European Central Bank over how to bring public finances under control as the euro zone splutters out of crisis.
Under Mr. Hollande's watch, France has already negotiated a two-year delay to 2015 from 2013 to get the deficit within the EU rule of 3% of GDP.
Germany--the euro-zone's economic powerhouse--has indicated it will resist further slippage from France.
Jens Weidmann, the head of Germany's Bundesbank, and a member of the European Central Bank's governing council, said in an interview published in Le Monde Wednesday that France must set an example in reducing its deficit.
But In his Le Monde editorial, Mr. Sapin began laying the groundwork for another deficit reduction miss, saying the country will continue cutting deficits at an "appropriate pace," will stick to current spending cut plans and won't raise taxes further.
France wants to change European policy to adapt deficit reduction to the current economic situation, he said.
"Europe must take firm, clear action by deeply adapting its decisions to the particular and exceptional situation of our continent," Mr. Sapin said.
The French finance minister also took a shot at the ECB. He said the Frankfurt-based central bank has taken the right decisions in the fight against low inflation but it must now go to the limit of its mandate to prevent the risk of a prolonged fall in prices, known as deflation.
Mr. Sapin said the ECB must also go to the limits of what is possible so that the euro "returns to a level that is more favorable to the competitiveness of our economies."
The ECB has resisted repeated French calls to do more to bring down the euro to make euro-denominated exports more competitive. Foreign exchange rates aren't a policy target for the bank, although it has said it has an eye on the strength of the euro which is a key factor that is keeping inflation below target.
Write to William Horobin at William.Horobin@wsj.com
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(END) Dow Jones Newswires
August 14, 2014 04:45 ET (08:45 GMT)
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