French economic stimulus unveiled

Laurent Fabius wants lower interest rates in the eurozone

In an effort to stave off a recession, the French government will pump 1.2bn euros into Europe's second largest economy during 2002.

Striking workers took to the streets of Le Mans

The cash injection will come despite calls for strict controls on government spending from the European Union.

The parliament was told about new income support measures by Finance Minister Laurent Fabius who is eager to prevent a dip in growth ahead of France's national elections early next year.

While Mr Fabius spoke, strikers marched the streets of French cities, calling for higher wages, better job security and the right to retire at 55 instead of at 60.

Transport was disrupted across the country after four of France's five main union federations called the strikes.

Growth

Analysts say official growth forecasts for this year and next are optimistic, and indeed the government is finding it hard to meet its own targets.

The official growth prediction for 2001 has been scaled back to 2% due to the global economic downturn and the crisis caused by the 11 September attacks.

Mr Fabius also insisted that the European Central Bank (ECB) has "room for manoeuvre" on monetary policy, implying that he believes the Bank could and should cut interest rates further to support the 12 economies in the eurozone.

Several other eurozone ministers have said the same in recent weeks as unemployment has remained stubbornly high and investment has tailed off.

Ken Wattret, senior economist at Paribas, told BBC's World Business Report that he feared there was a lot of downside economic risk in the eurozone at the moment.

Yet, Mr Wattret said, the ECB is loath to rock the boat with aggressive cuts in interest rates since there is a feeling that this could hurt confidence, a view he himself disagreed with.

Last Thursday, the ECB left interest rates unchanged.

Tax credit

Among the measures proposed by Fabius was an increase of a recently introduced tax credit.

The tax credit could be doubled.

When it was launched in September, the government said that 8 million people with low income would benefit.