France's employment minister Michel Sapin has admitted the country is "totally bankrupt".
The unexpected news came during a radio interview and is thought to have sent the country's business leaders into a state of shock.
"There is a state but it is a totally bankrupt state," Mr Sapin said. "That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective."
Mr Sapin's "totally bankrupt" statement is likely to cause huge embarrassment for President Francois Hollande, who will be left to undo the potential damage to his socialist government's reputation.
It also calls into further question Hollande's controversial "tax and spend" policies that have seen numerous entrepreneurs and high-profile celebrities leave the country.
The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country's deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn (£17bn).
Among those who moved their wealth out of France are Hollywood star Gerard Depardieu and the country's richest man Bernard Arnault.
Pierre Moscovici, France's finance minister, branded Mr Sapin's comments "inappropriate". Mr Moscovici said: "France is a really solvent country."