France joined other European nations yesterday in announcing an austerity plan that would involve €45 billion in spending cuts over the next three years.
Prime Minister François Fillon said the cuts were aimed at bringing France's public deficit back down to the EU's limit of three per cent of gross domestic product by 2013.
"We've made a commitment to bring down our deficit from eight to three per cent by 2013 and we will concentrate all of our efforts on it," Fillon said at a meeting of new members of his UMP party.
France's first announcement of austerity measures came as bond markets have mounted pressure on eurozone nations to get their public finances under control in the wake of the devastating Greek debt crisis.
Fillon said the government would cut the public deficit by €100 billion, with half coming from slashing spending and half from increasing revenues.
The prime minister broadly outlined where the savings would come from, including €45 billion in spending cuts and €5 billion from closing tax loopholes.
The centre-right premier is also counting on a rebound in the economy to bring in an additional €35 billion.
"As and when growth returns, revenues will grow once again," said Fillon.
The remaining €15 billion will come from halting temporary measures to boost the economy, he added.
Up to now, Paris has not adopted an outright austerity plan, only imposing a spending freeze. France has prided itself on supporting the economy through the worst of the global slump, despite the cost of an expanding budget deficit.
However, Germany's quick readiness to wield the budget knife has made Europe's economic powerhouse even more attractive in the bond market, putting more heat on France to do likewise.
After a record deficit of eight per cent of GDP this year, Fillon says the austerity measures aim to reduce the deficit to six per cent by 2011, 4.6 per cent in 2012 and three per cent in 2013.
The markets have wanted to see action and have been fretting over what has been seen as a lack of political will in Paris to take the stiff medicine adopted by Germany, a problem investors fear could get worse in the run-up to the 2012 presidential elections.
France nevertheless still enjoys the support of international investors and its top credit rating does not seem in any immediate danger, analysts say.
The Bank of France last week said the French economy would grow by 0.5 per cent in the second quarter of the year, even as a first estimate from the official statistics institute for the first quarter showed that growth was only 0.1 per cent.
The government is counting on the economy growing by 1.4 per cent for the whole of this year, having experienced the severest recession in 2009 since World War II with a contraction of 2.5 per cent.