French firms slashed output by 1.7 per cent in December, generating the sharpest monthly decrease in five years and prompting experts to say Europe was on the verge if not already in recession.
The news of the December slump came in figures from national statistics office INSEE.
Industrial production excluding energy, agri-food businesses and construction - considered by INSEE the best measure of manufacturing output - fell 1.8 per cent in December from November, the biggest drop in 13 months, the data showed.
The figures were sharply below forecasts by economists polled by Reuters who expected industry output to drop 0.3 per cent and manufacturing output to fall 0.5 per cent in December as firms retrenched amid fears of a potential war with Iraq.
Coming on the heels of data showing Germany's December industrial output registered its worst fall in four years, the French data compounded fears of a prolonged slump in the euro zone's two leading economies.
"Certainly core Europe is close to recession if not already in one. That is true of Germany, for France not really but it's following close behind," said Mr Adolf Rosenstock, economist at Nomura International in Frankfurt.
"Hopes of recovery are very much confounded and instead of improving we are going down and recession is a bigger threat than ever," he added.
The drop in overall French output was the steepest since November 1997, when it also fell 1.7 per cent.
INSEE also revised downwards the overall output increase for November to 0.9 per cent from 1.2 per cent previously. It similarly revised the figure for November manufacturing output to a rise of 0.9 per cent from a 1.1 per cent increase previously.