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Wednesday, 25 September, 2002, 18:30 GMT 19:30 UK
France risks EU anger over tax plans
French Finance Minister Francis Mer
Francis Mer: French budget may remain in deficit
The French government has announced proposals to cut taxes and raising security spending, progressing political priorities at the risk of incurring the wrath of Brussels.

A budget bill presented by the administration of Jean-Pierre Raffarin would see income tax cut by 1%, with spending on police raised by 5.7%, and investment in the military boosted by 6.1%.

"Security is a preoccupation of the government, an issue it has taken on and which the French have begun to feel is being treated seriously," a government adviser said.

The package means France could miss a 2006 deadline set by the European Commission for eurozone states to balance their books, even though Wednesday's package also included plans to reduce spending by axing 1,700 public sector jobs.

Finance Minister Francis Mer said France could post a budget deficit equivalent to 1% of economic output in 2006.

Deadline eased

The package comes the day after the commission, which had said that budgets should be balanced by 2004, relaxed the deadline in the face of large deficits being run by France, Italy, Germany and Portugal.

The move was welcomed as a "realistic measure" by Local Liberties Minister Patrick Devedjian.

"Moreover, it's a success for French diplomacy which got Brussels to understand," Mr Devedjian added.

But the concession angered countries such as the Netherlands which have risked unpopular steps to ensure their budgets broke even.

Economic and Monetary Affairs Commissioner Pedro Solbes on Wednesday urged countries running large deficits to spruce up their finances.

"The member states that have not yet achieved a budgetary position of close to balance or in surplus have to complete the transition process rapidly," Mr Solbes said in a quarterly report.

Election promises

France's tax cuts are in line with election pledges by President Jacques Chirac to cut income tax by 30%, with steep reductions in business levies aimed at promoting the growth and employment.

Mr Mer's said the French budget could record a 0.5% deficit in 2006 and meet Mr Chirac's promises if economic growth hit 3%.

Growth of 2.5%, more in line with France's long-term record, would see the deficit come in at 1%.

The current deficit level of 2.6% is set to remain unchanged next year under Wednesday's proposals.

See also:

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