French government plans cuts, tax rises to balance budget

France's government insists the French economy will grow this year, contradicting economists who predict a mild recession. Plans to raise taxes and cut spending have sparked criticism from right and left.

Reuters/Philippe Wojazer

The French finance ministry on Wednesday presented a stability plan including higher taxes and 20 billion euros in savings would reel in the deficit to European-set targets.

But it's also banking on economic growth of 0.1 per cent this year and 1.2 per cent in 2014, whereas the International Monetary Fund and the French council for public finances predict slight contractions.

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The government predicts that job creation will start to revive in the second quarter of 2013, leading to unemployment beginning to decline in the last quarter.

The plan proposes that 46.3 per cent of revenue will come from taxes, rising slightly to 46.5 per cent in 2014, bringing France to the second position in Europe behind Denmark, which was at 48.2 per cent in 2010, and leading to criticism from the right.

The government intends to reduce public spending by 60 billion euros by 2017, including with a cut of one billion euros in family allowance to the most well-off.

Unions have already criticised the predicted reduction in payment of unemployment benefit based on the hypothetical reduction in joblessness figures.

The European Commission could sanction France for exceeding deficit targets and said it would carefully examine the government's plans.

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