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France needs austerity cuts now to escape 'danger zone'

France needs to push through €43bn (£35bn) in budget savings over the next two years if President François Hollande is to meet his deficit reduction targets, the country's national audit office said yesterday.

The auditor said that "repairing our public accounts is indispensable" and added that France's existing 5.8 per cent deficit had put the country in an economic "danger zone".

To meet President Hollande's goal of reducing the deficit to 3 per cent by 2014, France will need to put up taxes and cut spending by up to €10bn this year and €33bn next year.

France's Prime Minister, Jean-Marc Ayrault, is set to lay out a broad economic plan today, and the budget will be unveiled tomorrow.

France's own market borrowing costs are falling, despite the chaos in the eurozone that has pushed Spain and Italy to the brink of bankruptcy. Since May's election, the Paris government's 10-year borrowing costs have fallen from 2.9 per cent to 2.7 per cent.

Mr Hollande, pictured above, was elected in May, defeating incumbent Nicolas Sarkozy on an anti-austerity platform. But France's Finance Minister, Pierre Moscovici, admitted last month that tax increases and spending cuts were inevitable.

The French auditor – known as the Cour des Comptes – also cut its growth forecasts. It said that the economy would grow by 0.4 per cent this year, down from a previous 0.7 per cent. It sees growth in 2013 of 1 per cent, down from 1.75 per cent previously forecast.