French austerity

Prime Minister Francois Fillon on Monday announced austerity measures that would save 100 billion euros and eliminate France's budget deficit by 2016, including 500 million euros in additional budget cuts for next year.

Fillon said bankruptcy was "no longer an abstract word" for France and that the country's financial, economic and social sovereignty required "prolonged collective efforts and even some sacrifices."

The prime minister added that his government would accelerate pension reforms, and raise the retirement age from 60 to 62 a year earlier than planned, as well as raise sales and corporate taxes.

Dangerous spiral

France is trying to reduce its budget deficit from 5.7 percent of Gross Domestic Product (GDP) this year, to 4.5 percent in 2012, and hopes to reach the official European Union limit of 3.0 percent in 2013.

France's public debt is running at 86 percent of GDP, one of the highest in Europe. "We have to get out of this dangerous spiral," Fillon said.

But he also stressed that raising taxes alone, as the opposition Socialists have proposed, would lead to a tripling of income taxes and a doubling of the sales tax. He said, as a result, cost-saving measures were unavoidable.

Fillon said that the salaries of French President Nicolas Sarkozy and his ministers, including himself, would be frozen as part of the austerity plan, and he called on business leaders to do the same.

France is not Greece

"The time has come to adjust France's efforts. Together with the president, we have only one goal: to protect the French people from the serious difficulties that many European countries are now facing," Fillon said during a press conference in Paris, alluding to the likes of Greece, Portugal, Italy, Spain and Ireland.

"Our country must not be condemned to have its policies one day imposed by others. I want to tell the French people that the budgetary and fiscal efforts that we undertake today are a choice we make for the country and for generations to come," he said.

France is also very keen to preserve its critically important Triple-A credit rating, which allows it to borrow money at lower interest rates. Rating agencies have warned that France risks losing its top AAA status, if efforts are not undertaken to streamline its fiscal policies.

Author: Gregg Benzow (dpa, AFP, AP)
Editor: Andreas Illmer