The French Finance Minister Dominique Strauss-Kahn yesterday announced new plans aimed at meeting the Maastricht criteria for entrance into the European single currency.
The budget plans follow the publication of the government audit on public spending, which was called by the Prime Minister, Lionel Jospin, to report on the position of the French economy after a four-year period of right- wing government.
The 1997 budget deficit is between 3.5 and 3.7 per cent of the gross domestic product (GDP), or between 312 to 322 billion francs (pounds 3.12bn to pounds 3.22 bn) and the government will need to do some serious juggling if they are to meet the Maastricht criteria of a maximum deficit of 3 per cent of the GDP.
The plan is essentially an attempt to raise taxes and cut spending without upsetting the majority of socialist voters. The bulk of the savings will come from a tax increase on large companies. Twenty-two billion francs (some pounds 2.2bn) will be raised from a temporary increase in taxation of 15 per cent on large companies.
The remaining F10bn will come from spending cuts. Mr Strauss-Kahn has committed himself to cuts of F2bn in defence, but would not specify where the remaining F8bn will be found.
The government has chosen to set its objective for the reduction of the deficit in monetary terms and not as a percentage of the GDP, as laid out by Maastricht.
However, the Finance Minister is adamant that France is still on course for the single currency.
"By the end of the year we will be in the same position as our partners," he said. He added that France had already satisfied the other four Maastricht criteria, namely low inflation and interest rates and a stable currency, as well as being one of the few countries to achieve a national debt of less than 60 per cent of the GDP.
Sharp criticism has come from the right, which has described the measures as "a threat to jobs and investment."
Both the right-wing President, Jacques Chirac and his former Prime Minister Alain Juppe, refused to comment.