France has become the second European Union country after Ireland to enter recession with global market turmoil biting into investment, jobs and wages, the French Government said today.

The economy, which shrank by 0.3 per cent in the second quarter, is expected to fall by 0.1 per cent in the third and fourth, according to France's National Institute of Statistics and Economic Studies.

A recession is generally defined as a drop in the national wealth for two successive quarters.

"There have been two quarters of negative growth — that's called a technical recession," said Eric Woerth, the Budget Minister.

However, he insisted that the French economy would register overall growth this year, albeit at only 0.9 per cent.

"It's not a lot, it's even very little, but it's still growth," he said.

The impact of the slowdown was felt last month with a 2.2 per rise in unemployment, the biggest monthly increase for 15 years.

The Government gave warning that the worse was yet to come, saying the jobless total would continue to swell for the next 12 months.

President Nicolas Sarkozy has responded by unveiling plans to throw public money at banks, businesses, low-wage earners and the unemployed in an attempt to stimulate the economy.

He appears to have jettisoned his pledge to France's eurozone neighbours to keep its budget deficit to under three per cent of national wealth.

"The deficits are not the priority of priorities," said Henri Guaino, his adviser. "The priority is to save the world banking system."

Ireland became the first European country to declare that it was in recession last week after its economy shrunk by 0.3 per cent in the first quarter and 0.5 per cent in the second.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive