–Adds Comments From Prime Minister, Details On Measures

PARIS (MNI) – The French government has trimmed its growth
forecasts for this year and next and intends to tighten fiscal policy
to assure that public deficit targets are met, Prime Minister Francois
Fillon said Tuesday.

GDP growth is now expected at 1.75% both years, down from 2% and
2.25% previously, Fillon told a press conference here. The public
deficit targets of 3% of GDP in 2013 and 2% in 2014 remain unchanged,
while next year’s goal has been trimmed by 0.1 point to 4.5%.

A series of tax hikes and reductions in tax write-offs should boost
public revenues by E1 billion this year and E11 billion next year,
Fillon said. For 2013, a further increase of E3 billion is envisioned.

“The situation of the American economy and the sovereign debt
crisis have brought a marked slowdown in growth, notably in Europe in
the second quarter,” he explained. “We must take account of this.”

“We have by now passed the threshold of tolerance for
indebtedness,” Fillon said. “The reduction of the deficit is an economic
obligation economic. But it is also a social obligation, because our
country cannot continue to live beyond its means at the risk of breaking
the social compact.”

Over half of the extra revenues announced by Fillon would come from
a further 10% reduction in a number of “fiscal niches” on top of the
cuts this year.

A cap on firms’ ability to limit profit tax payments on the basis
of past losses, designed to bring corporate taxation more into line with
German practices, would alone bring E500 million this year and E1.5
billion next year.

Consumers of alcohol, tobacco and soft drinks will also contribute
more to state coffers, as will those who earn half a million euros or
more each year.

“A second concern has guided us — that of equity,” Fillon
explained. The measures are designed to “reinforce fiscal and social
justice.”

The 3% surtax on high revenues will remain in place until the
public deficit is lowered to 3% of GDP, he said. It is expected to net
E200 million next year — one fifth of the additional consumption tax
revenues.

In addition, the government aims to trim its budgeted outlays by
E500 million this year and E1 billion next year, he said.

“Thanks to the modernization efforts we have undertaken since 2007,
our country is in a position to assume…this budgetary discipline that
accommodates growth and allows us to support jobs,” the prime minister
said.

“It is a rigorous policy that will allow France to remain sovereign
both in the financial and social spheres,” he added. “Our country must
honor its commitments. It is in the interest of all French people.”

Fillon again called on the political opposition to back the
so-called “golden rule,” a proposed constitutional amendment to oblige
each new government to lay out a path to bring public finances into
balance.

“To be credible, the leaders of the opposition ought to show more
intellectual rigor,” he affirmed. “Beyond partisan divisions, this
common sense rule will signal the infallible will of our country to
liberate itself from the weight of its deficits.”

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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