France unveils €34bn cuts package

The French government unveiled a package of spending cuts and tax rises in a bid to reduce the deficit sharply in the face of pressure from its European partners and international investors.

The 2011 budget presented in parliament includes €40bn in spending cuts and extra revenue that Budget Minister Francois Baroin says will rein in the country’s deficit to 6% of gross domestic product next year from 7.7% in 2010.

“This is a historic budget,” Baroin said. “A drop in the deficit by 1.7 percentage points in one year has not been seen in fifty years,” he said.

To meet its goal, the government is also counting on economic growth picking up to 2% next year from 1.5 in 2010.

Finance Minister Christine Lagarde said she had “no hesitation” in sticking with that forecast, which is above that of many private sector economists as well as the European Commission.

France has pledged to its European partners to bring down its deficit to 3% of GDP by 2013. While Germany has set 2016 as a date to balance its budget, Baroin would only say that France will “probably take a little longer” to do the same.

France’s debt meanwhile is forecast to continue rising to almost 88% of GDP in 2012 from 83% this year, and to begin falling beginning in 2013.

Much of the spending cuts in next year’s budget come from a rollback in stimulus measures France introduced during the financial crisis.

Another €10bn will be saved by eliminating tax breaks, including those for so-called “triple-play” internet, television and telephone contracts and a break for newly wedded couples.