France announces fresh measures for austerity

City A.M. Reporter
FRANCE announced €65bn of tax hikes and budget cuts over five years yesterday, as President Nicolas Sarkozy seeks to protect the country’s creditworthiness in financial markets without killing his chances of re-election in six months time.

Minister’s salaries, including Sarkozy’s, will be frozen as part of the plan, as the government aims to make the austerity measures more politically palatable. Sarkozy previously attracted criticism for increasing his salary by 170 per cent.

The main goal of the measures is to protect France’s top-notch credit rating, which allows the government to borrow cash at relatively cheap rates despite the ongoing Eurozone crisis.

But economists said the government’s growth outlook was still too optimistic, even after cutting the forecast for 2012 to one per cent from 1.75, meaning the latest measures might not be enough for France to meet its deficit reduction goals.

They also said that much of the plan would have to be carried out after the April and May election.