The French government presented a budget Friday that was heavy on taxes — including a controversial 75 percent income rate on high earners — but which critics said lacked fundamental reforms that could jumpstart economic growth.
President Francois Hollande's
cabinet defended the spending plan for next year, calling it a
"fighting budget" that would win the "battle" against joblessness and
help growth.
Like many European countries, France
must tread a fine line between cutting the debts that dragged them into
the current financial crisis and investing in the economy to spur
growth.
The French economy,
the second largest among the 17 countries that use the euro, has not
grown for three straight quarters, the national statistics agency
confirmed Friday. Unemployment has been on the rise for more than a year
and stands at 10.2 percent.
"This is a serious budget, it's a leftist budget and it's fighting budget," Finance Minister Pierre Moscovici told French radio station Europe-1 Friday morning.
Because Hollande promised that he would slash the country's deficit to 3 percent next year — a limit required by European rules — the government must find €30 billion in savings. One-third will come in spending cuts, with the rest in new or higher taxes on the wealthy and big companies, including a 75 percent tax on incomes over €1 million.
Among the other
measures included are: a new income tax level at 45 percent for those
making more than €150,000, an increase of capital gains taxes to bring
them more in line with how salaries are taxed, and a cap on certain
deductions for large companies on their income taxes.
"France is sick from a model that isn't viable," said Guillaume Carou, CEO of Didaxis and president of the Club of Entrepreneurs, which represents 15,000 small businesses. "But (the government has) chosen to keep it, that's what the 2013 budget reveals."
Prime
Minister Jean-Marc Ayrault rejected that characterization, however,
insisting that the budget would win the battle against unemployment.
"It's
a budget that aims to inspire confidence and to break the debt spiral
that keeps growing and growing," he said after the budget was presented
to the Cabinet.
The budget
is built around an expectation of 0.8 percent growth for next year. If
growth misses the projections, more cuts could be needed later.
Moscovici
conceded that most economists predict the French economy will grow just
0.5 percent, but said that if the European debt crisis stabilizes,
France would meet its targets.
Source: Yahoonews
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