France unveils 'harshest budget in 30 years'

In what Hollande has described as France's harshest budget in 30 years, business and personal taxpayers were asked on Friday to make an "unprecedented effort" to slash the country's public spending deficit, the Guardian reports.

However, the Socialist government sidestepped swingeing cuts in public spending, including pensions and state salaries, in its 2013 budget, which aims to find €36.9bn in savings.

It was also forced to concede it could not keep its pledge to get the country out of the red by 2017.

The budget was a delicate balancing act in which Hollande sought to reassure investors and the financial markets, while simultaneously hiking taxes on large businesses and high-earners.

However, it commits the government to an austerity programme that will be unpopular with leftwingers in the party, at a time when unemployment is rising and the economy teeters on the brink of recession.

Hollande and the prime minister, Jean-Marc Ayrault, had stressed prior to what they described as a "combat" budget their aim to reduce France's public deficit to 3% of GDP by 2013, in line with its EU commitments. The deficit is around 4.5% of GDP for this year.

The budget aims to raise two-thirds of the £36.9bn savings with extra taxes split evenly between households and large companies, plus more than €10bn in public spending cuts. The burden between taxes and spending cuts would be shared 50-50 from 2014, the government said.

The standout measure, from a public perspective, was a new 75% tax rate on people earning more than €1m a year. This is expected to hit only 2,000 taxpayers. A new 45% income tax band is to be introduced for those earning more than €150,000 a year.

Business leaders, including L'Oréal chief, Jean-Paul Agon, have criticised the "supertax", claiming it would prevent France from attracting the cream of executives and drive the wealthy into tax exile.

On Friday, France's opposition UMP party reacted to the budget with dismay.

Former agriculture minister Bruno Le Maire said he was worried and disappointed, adding: "France is going to the wall."

He told Europe 1 radio: "None of the solutions announced will get the country back on its feet, fight unemployment or create jobs."

Marine Le Pen, president of the far-right Front National, described the budget as "absurd hyper-austerity".

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