French President, Nicolas Sarkozy, made a bid to defend France's top credit rating by raising taxes on companies and the wealthiest, as he aimed to limit the fallout of budget cuts and a slowing economy in an election year.
Prime Minister, François Fillon, yesterday announced €12 billion ($17 billion) of measures in 2011 and 2012 and cut growth forecasts, saying the euro region’s second-largest economy will expand less than 2 per cent in each year. The deficit will be 4.5 per cent of gross domestic product in 2012, beating the target, when Sarkozy seeks re-election.
“There is a crisis of public debt in industrialised nations and the US economic slowdown is slowing our own economy”, Fillon said late yesterday on TF1 television. “83 per cent of the measures in this plan are aimed at big companies, owners of capital and wealthy households. We aimed for measures that were not going to break growth.”
France, the second-biggest contributor to euro bail-out funds, now pays a premium of 64 basis points over Germany to borrow for 10 years, up from 27 basis points when the rescue system was set up in May 2010. Germany forecasts a balanced budget by 2014. Sarkozy’s budget-cutting became urgent this month when speculation mounted that France was vulnerable to the euro-area debt crisis after the US was downgraded by Standard & Poor’s. Fillon cut forecasts of economic expansion to 1.75 per cent this year and next from 2 per cent in 2011 and 2.25 per cent in 2012.
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