Leaders call for bolstered IMF, but final communique is short on details as eurozone crisis overshadows economic summit.
The French government has announced a package of austerity measures it says will save around $138bn (100 billion euros) as part of plans to eliminate the country’s budget deficit by 2016.
Officials said the plan, announced on Monday, would save about $9.6bn in 2012, followed by savings of about $16bn in 2013 as France seeks to protect its AAA credit rating and avoid the financial market pressure engulfing other major eurozone economies such as Italy and Greece.
“The time has come to adjust France’s efforts. With the president, we have only one goal: to protect the French people from the serious difficulties that many European countries are now facing,” said Francois Fillon, the French prime minister.
“I believe that our citizens are now aware of the risks to our livelihoods and futures caused by deficits and debt. Bankruptcy is no longer an abstract term. Our financial, economic and social sovereignty require prolonged collective efforts and even some sacrifices.”
The move is being seen as a major gamble for President Nicolas Sarkozy, who is already suffering from low approval ratings six months before an election in which he is expected to seek a second term.
“I want to tell the French people that the budgetary and fiscal efforts that we undertake today are a choice we make for the country and for generations to come. “
– French PM Francois Fillon
His government says extra savings are urgently needed to keep France’s finances under control, since it cut its growth forecast for next year to one per cent from 1.75 per cent last week.
The new measures follow August’s 12-billion euro deficit-cutting package that raised taxes on the rich and closed tax loopholes.
Al Jazeera’s Jackie Rowland, in Paris, said the French government was implementing the austerity plan as a measure to stay as far away from debt-crippled Greece’s situation as possible.
“France does not want to suffer the same fate as Greece,” she said. “The French government is going to try and save $25bn in 2012 and 2013.
“[The cuts are] a big risk for the French government… but they will be willing to put up with these tough measures in order to prevent France from going the same way [as Greece and Italy].”
Defending AAA rating
At Monday’s press conference, Fillon discussed specific budget cuts and tax increases, including a rise in the value added tax (VAT) paid on many goods and services from 5.5 per cent to 7.0 per cent and a temporary rise in corporate taxes paid by large companies by five per cent.
“I want to tell the French people that the budgetary and fiscal efforts that we undertake today are a choice we make for the country and for generations to come,” Fillon said.
Francois Hollande, who is expected to be the Socialists’ presidential candidate and Sarkozy’s main rival in next year’s election, said on Saturday that raising the VAT rate so soon after lowering it would be “the proof of inconstancy, political incoherence”.
Fillon also confirmed on Monday that France’s retirement age would be increased from 60 to 62 by 2017, rather than 2018 as previously announced, drawing criticism from labour unions.
“The downward revision of benefits… hits families and youths when their buying power and social inclusion needs to be bolstered. “
– Damien Cerqueus, labour union spokesperson
Jean-Claude Mailly, head of the French General Confederation of Labour, said that accelerating the pace of pension reform would be “significant and provocative”.
Damien Cerqueus, a spokesman for the French Democratic Confederation of Labour spokesperson, said the retirement reforms would bring in little cash and worry workers and were only aimed at sending a message to ratings agencies”.
Cerqueus also criticised other reductions in health, retirement, and family benefits: “The downward revision of benefits for family and housing is profoundly unfair and counter-productive. It hits families and youths when their buying power and social inclusion needs to be bolstered.”