Sarkozy rules out Cabinet reshuffle, austerity plan

French President Nicolas Sarkozy has scotched rumours he is planning a major Cabinet reshuffle and denied opposition accusations that a shock austerity budget package will be announced after local elections this month.

In a wide-ranging interview with Le Figaro newspaper, Mr Sarkozy promised to push ahead with his reform agenda despite his recent slump in the opinion polls, saying France's real economic problems stemmed from domestic structural faults.

Mr Sarkozy's centre-right allies are expected to suffer heavy losses at the municipal ballot tomorrow and tomorrow week - the first nationwide test of his popularity since the last year's presidential and parliamentary vote. Opposition Socialist politicians have said the government will have to tighten its belt after the vote, as the economy is expected to grow by less than the government's two to 2.5 per cent target this year and the deficit is likely to climb.

"I don't believe in austerity plans. They don't go anywhere," Mr Sarkozy was quoted as saying, adding that he would nonetheless press ahead with previously announced plans such as cutting back France's army of public sector workers.

"Everyone must understand that France has to reduce its public spending," Mr Sarkozy said, shrugging off suggestions the international economic situation would impact his plans.