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Last Updated: Wednesday, 3 September, 2003, 21:00 GMT 22:00 UK
French PM pledges tax cuts
Jean-Pierre Raffarin
The Prime Minister wants to kick-start the economy
France will cut its income tax rate by three percentage points in next year's budget, Prime Minister Jean-Pierre Raffarin has said in a press interview.

The move is intended to boost France's sluggish economy and comes despite calls from the European Union for the country to cut its budget deficit.

In an interview with French newspaper Le Figaro, Mr Raffarin also said benefits for low earners would be increased.

"What we need in this country is to encourage employment," he told the paper.

"We need to create wealth before we can share the fruits of growth.

"It would be a serious mistake to change strategy just at the moment when we perceive signs of a return to growth."

Budget fears

The weakness of the French economy has already caused the government to cut its growth forecast for this year to 1.3% from 2.5%, and reports have suggested it could be lowered further.

But news of tax cuts is likely to raise fears about the state of government finances.

Earlier this week France admitted that its budget deficit this year will be 4% of gross domestic product - a level way above eurozone rules on fiscal discipline, which were designed to help underpin the euro.

This would be the second year in succession that France has exceeded the 3% deficit ceiling, and adds to the growing list of eurozone countries to have broken the rules.

There are also fears it will break the 3% barrier in 2004 as well, a move which could incur fines from the European Commission.

The French Government has been particularly vocal in its calls for looser eurozone budget rules.

Last week Mr Raffarin repeated the call for flexibility after a meeting with European Commission president Romano Prodi.




SEE ALSO:
France admits huge deficit breach
01 Sep 03  |  Business
Chirac seeks softer budget rules
14 Jul 03  |  Business
EU acts on French deficit
02 Apr 03  |  Business
German budget '15bn euros short'
25 May 03  |  Business
German businesses predict recovery
25 Jun 03  |  Business


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