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Last Updated: Wednesday, 26 September 2007, 11:33 GMT 12:33 UK
Sarkozy debut budget eyes growth
Nicolas Sarkozy
Sarkozy is keen to stimulate France's economy
A string of measures aimed at boosting France's growth have been unveiled in the country's budget, Nicolas Sarkozy's first since becoming president.

French employers are being offered incentives to allow workers to do overtime, and high earners are to see their tax burden reduced.

The measures would be paid for through higher overall tax receipts as a result of the growth, Mr Sarkozy said.

It comes days after the French prime minister said France was "bankrupt".

"France is a rich country, which happily has the resources which allow it to face the future, but the state is in a critical situation," Prime Minister Francois Fillon warned.

Growth unchanged

France has been under pressure from its European neighbours to cut its deficit and debt levels but analysts say the budget is not expected to ease those concerns.

The budget forecast that the country's deficit would fall to 2.3% of gross domestic product (GDP) in 2008 from 2.4% this year.

Expectations for growth remain unchanged - with expansion predicted to be between 2% and 2.5% in 2007 and 2008, although this year is likely to be at the bottom end of the range, Mr Sarkozy said.

The budget includes a package of about 9bn euros in tax cuts - which was promised in Mr Sarkozy's election manifesto but has been revised down from a previous estimate of 15bn euros.

Among the cost-cutting measures, civil servant numbers will be reduced by not replacing some retiring staff. About 22,900 jobs are expected to be phased out.

Earlier this month, European Central Bank president Jean-Claude Trichet had expressed concern that French public finances were "in very great difficulty."

He said that EU statistics showed that France would spend most on public spending as a proportion of GDP "not only within the eurozone, but in the 27-member European Union."

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How the budget may affect France



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