French economic policy is on the right road and Paris should resume cutting income tax and hold down state spending in 2005, President Jacques Chirac said in a New Year's address on Friday. Chirac said his government should "do everything for growth" including continuing tax cuts he promised in his 2002 re-election campaign but have been held up as France's budget deficit remains stubbornly over the three percent eurozone ceiling.
"The year 2004 will be the best for growth of these past four years," he said without giving a figure. The government predicts 2.5 percent growth but the state statistics office INSEE sees 2.1 percent and the Bank of France 2.2 percent.
Chirac said unemployment had stabilised for the first time since 2001.
Figures released on Friday showed it held steady at 9.9 percent in November, well above the eurozone's 8.9 percent average, and economists said they were pessimistic for 2005.
"That is not enough, but at half-way, we are on the right road," he said, referring to the current five-year presidential and parliamentary mandate. "I urge the government to continue and increase its efforts."
"Do everything for growth. Continue increasing the minimum wage and support purchasing power.
Continue income tax cuts and the drop in other costs. Continue to control our spending."
Chirac pledged to cut income taxes by 30 percent by 2007, but has only reduced them by 10 percent so far.
Conservative Prime Minister Jean-Pierre Raffarin has pledged to cut unemployment by one-tenth by the end of 2005.
Unemployment is a key concern for French voters, who handed the government stinging defeats in regional and European parliament elections this year.
Analysts say the jobless prospects leave a mixed picture of the state of the recovery in France, the eurozone's second largest economy after Germany.
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