By Ingrid Melander
PARIS (Reuters) - Weak consumer spending and business investment brought the French economy to a standstill in the first quarter of the year, casting doubt on the government's annual growth forecast and its pledges to meet EU deficit targets.
The flat reading missed analyst expectations and highlighted the diverging paths of the euro zone's two largest economies as European powerhouse economy Germany on Thursday posted 0.8 percent growth in the first quarter.
France will now need 0.5 percent growth each quarter to meet a government forecast of 1 percent growth for 2014, Natixis Asset Management chief economist Philippe Waechter estimated, saying that would be difficult to achieve.
"This is clearly not good," Waechter said.
"France's public finance plan has been built on the 1 percent growth forecast. If we don't achieve it France will not meet its (debt and deficit) targets for 2014 and 2015."
Socialist President Francois Hollande's popularity has been hammered by his failure to keep an election pledge to bring down unemployment. France's jobless rate remains stubbornly anchored above 10 percent.
His government has enacted some modest reforms aimed at boosting the growth potential of the economy while setting out planned public spending savings but its room for manoeuvre is limited.
Trade unions on Thursday called on the country's public sector workers to go out on strike in protest at a decision to freeze their salaries to yield new savings for the state budget.
Investment overall contracted by 0.9 percent and exports brought more bad news, slowing to a 0.3 percent increase from 1.6 percent in the previous quarter, suggesting France is failing to benefit from a better global environment.
"France is trailing the rest of Europe," BNP Paribas economist Dominique Barbet said, forecasting 0.8 percent growth for 2014 overall. "The structure of growth is a major source of concern. Private consumption declined by 0.5 percent, going much beyond a simple correction of the fourth quarter gain."
Inventory changes and public spending were the only factors keeping the euro zone's second-largest economy from contracting.
Asked to react to Thursday's data, Finance Minister Michel Sapin told Europe 1 radio that French growth would be "more than zero" in 2014 overall. He referred to the government's existing one percent target but did not explicitly reaffirm it.
Some of the flat GDP reading for the first quarter was due to milder-than-usual weather and to the fact that consumers and businesses had spent more in the fourth quarter of last year, anticipating this year's sales tax rise.
An INSEE statistics' office annual revision of national accounts - this time enhanced by a one-off change of base and new EU calculation rules - brought the government better news with updated debt and public deficit forecasts.
France's economy totalled 2.1137 trillion euros in 2013, with the GDP level raised by just over 3 percentage points by the new calculation, INSEE said. The impact was smaller on quarter-to-quarter and annual percentage changes.
The changes meant INSEE revised last year's debt-to-GDP ratio down to 91.8 percent from 93.5 percent while the public deficit was revised down to 4.2 percent from 4.3 percent, a slight help to the government in its drive to meet EU deficit targets.
France is due to sell 7-8 billion euros of fixed-rate, medium-term bonds later in the morning and 1.0-1.5 billion euros of inflation-linked bonds.
For a table of GDP data:
(Reporting by Ingrid Melander and Yann Le Guernigou; editing by Mark John and Toby Chopra)