France unveiled a budget for next year yesterday that promised a modest improvement in its finances and offered households tax cuts, setting the stage for 2017’s presidential election.

Finance Minister Michel Sapin said total spending would fall next year to 55.1 per cent of economic output from an estimated 55.8 per cent this year, one of the highest ratios among developed countries.

A series of planned tax cuts for households and companies that symbolise the Socialist government’s conversion to supply-side economics will reduce the total tax burden to 44.5 per cent of GDP next year from 44.6 per cent this year.

The independent public finance watchdog deemed the government’s forecast of growth next year of 1.5 per cent to be “achievable”.

Budget sets stage for 2017 election

That is good news for the government as that is the level widely considered by economists to be necessary to get unemployment falling, which Hollande has set as his top economic objective and a condition for his running again for president.

“This budget plan allows us to clear up the damage done in the past years,” Sapin said. The public deficit will fall back to 2008 levels next year, while the trade deficit will drop to 2007 levels this year thanks to soaring exports, he added.

The central government will contribute €5.1 billion to savings next year, notably by trimming housing benefits by €225 million, while local authorities will be expected to save €3.5 billion and the welfare system €7.4 billion.

“Implementing the spending cuts included in the budget will be challenging, while the risks associated to the growth forecast are clearly on the downside,” said Diego Iscaro, France Economist at IHS Global Insight.

Cheap oil, a weaker euro and record-low borrowing costs thanks to the European Central Bank’s money-printing have put wind in the sails of the government, which expects higher consumer and business confidence in recent months to translate into higher investments.