France prepares for impending budget cuts

French government ministers spent the weekend paving the way for additional belt-tightening measures to be announced on Monday, stressing prudence in light of the punishing eurozone crisis and the need to meet the country's deficit-cutting goals.
After France lowered its economic growth forecasts for next year, President Nicolas Sarkozy's centre-right government needs to trim another 6 to 8 billion euros ($8-11 bln) from the budget in order to keep its deficit-cutting plans on track.
Last week, France trimmed its growth forecast for 2012 to 1 percent from 1.75 percent. On Saturday and Sunday, government ministers set the stage for Monday's expected announcement, taking to the airwaves to highlight the importance of spending cuts to ensure France's coveted triple-A credit rating.
"The 2012 budget will be one of the most rigorous budgets that France has seen since 1945," said Prime Minister Francois Fillon on Saturday, adding France's "hour of truth has arrived."
In a televised speech to regional elected officials in the French Alps resort town of Morzine, Fillon provided no further details on the plan, but said it was pointless to blame "the rating agencies, bankers, speculators or I don't know what other scapegoat" for France's deficit.
"Moreover, it's not useful to believe there are hidden treasures to finance our public spending," said Fillon. "There is no other recipe to lower debt than to reduce spending."
France's budget gap currently stands at 5.7 percent of GDP. The government's goal is to reduce that to 4.5 percent by next year, and reach the EU-mandated limit of 3 percent by 2013.
In August, Fillon presented a plan to shave 12 billion euros off the 2011 and 2012 budgets. The new 6 to 8 billion euros in savings will be on top of his previous projections.
Budget Minister Valerie Pecresse told M6 television on Sunday that social spending will not be affected, and the burden on households will be equally shared.
"Everyone will contribute according to their own capacity," said Pecresse, adding the government did not want to raise household taxes to put its financial house in order.
"Today we are at a level of unbearable debt," she said. "We have to pay back our debt."
Le Journal du Dimanche newspaper said on Sunday the cuts could come from raising France's VAT rates in certain sectors from 5.5 percent to 7.0 percent, while slapping a new corporate tax on businesses with annual revenues over 500 million euros.
Other possible cuts could come from an additional "day of solidarity" - in which salaried workers work for free for one day, their pay going to the state - the newspaper said.
Ministers sought to fend off suggestions the extra spending cuts pointed to a slipshod performance by the government in its first budget.
Francois Hollande, Sarkozy's Socialist challenger for presidential elections next April, said on Saturday a potential hike in the VAT rate would be "the proof of inconstancy, political incoherence." Sarkozy's government lowered VAT rates in 2009.