The Labor Ministry said that the number of unemployed rose by nearly 25,000 on the month to 3.388 million, over 10.4% of the workforce. Along with more than 1.6 million under-employed, the number of people included in the country’s broader definition of unemployment has now topped 5 million for the first time ever.

The figures are the latest evidence that the timid reforms  announced so far by Socialist President Francois Hollande to get the economy going have fallen short of expectations. Prime Minister Manuel Valls admitted that the figures were “bad” but said there would be “no fatalism” in his government.

Earlier Friday, the national statistics office INSEE said that there had been zero economic growth in the first quarter of the year, and business surveys for April and May have suggested that the economy has shrunk since then.

France is now the big stand-out laggard on economic reform in Europe. The reform of labor markets, made voluntarily by Germany, the U.K. and Scandinavia, and then forced upon bail-out recipients Spain, Portugal and Greece, is still a political taboo for the E.U.’s second-largest economy.

With growth and employment undershooting, France is also missing its targets on reducing its budget deficit.  The European Commission expects France’s to be 3.9% this year and 3.4% next year – and even that rests on growth forecasts that now look too optimistic.

Against this backdrop, Hollande and Italian Prime Minister Matteo Renzi are desperately pushing the E.U. at a summit meeting in Brussels Friday to loosen rules on government borrowing, basically stripping out of the debt calculations anything that can be considered as “investment”.

That would unwind much of the grand bargain that Germany and its allies drove through the euro crisis, bankrolling bailouts in return for a return to sustainable budget policy. Those countries have already signalled their opposition to watering down the rules this week.

The economic news from elsewhere in Europe Friday was mixed but still generally gloomy, with the European Central Bank’s recent stimulus package apparently overshadowed by the Ukraine crisis.

The European Commission’s eurozone Economic Sentiment Indicator, a composite of business and consumer confidence, fell by 0.6 points to 102.0 in June, although it remained above its long-term average of 100.

In Spain, meanwhile, there was further evidence of the threat of deflation, as consumer prices stagnated on the month in June, missing forecasts of a 0.3% rise. In year-on-year terms, prices were unchanged, well short of the 2% targeted by the ECB and down from a rate of 0.2% in May. Germany’s largest federal states by contrast reported modest increases in consumer prices, slightly above forecasts.