European Commission president Jose Manuel Barroso said France needed to present a credible programme of structural reforms as new data showed Europe’s second largest economy slipping into a shallow recession.

Mr Barroso, who was due later to meet president Francois Hollande in Brussels, said France must pursue reforms if the EU was to grant it two more years to bring its budget deficit down to 3 per cent of economic output as promised.

The extension would be approved “if France presents a credible reform programme so that France can regain its competitiveness,” Barroso told Europe 1 radio.

Yesterday, the French parliament passed a landmark reform of the country’s labour code, part of Mr Hollande’s efforts to convince European partners that he is committed to revamping the economy.

But as preliminary data today showed the French economy contracting by 0.2 per cent in the first quarter , Barroso said that France needed to prove its commitment to pursue further structural reforms.

“The truth is that France has lost competitiveness over the past 20 years,” he added.

Speculation of a cabinet reshuffle intensified yesterday after foreign minister Laurent Fabius, a former premier and finance minister, said France’s giant finance ministry needed a “boss” to better coordinate economic policy.

The remarks targeted finance minister Pierre Moscovici, whose left-wing firebrand junior minister Arnaud Montebourg has criticised budget cuts and had a series of run-ins with potential foreign investors in France.

Mr Barroso - whose commission is perceived by French leftists as economically liberal - said there was a tendency in France to see new developments in the world as a threat rather than an opportunity and said that opposing globalisation was “whistling in the wind”.

Reuters