PARIS - President Nicolas Sarkozy’s government has bowed to economic reality, admitting its growth forecasts were overly rosy and announcing a $16 billion austerity package in a bid to ensure that France doesn’t miss a vital pledge to cut its deficit.
The government unveiled the package of spending cuts and tax increases two weeks after France came under fire by investors who feared the country’s high debt and deficit levels, and its role bailing out weaker European partners like Greece.
Prime Minister Francois Fillon said the package is vital for France to keep its pledge on deficit reduction and maintain its AAA credit rating.
France has not managed to balance its budget in three decades, and Sarkozy has staked his credibility on hitting a series of deficit targets over the next three years.
Fillon blamed the international economic slowdown for France’s failure to achieve the 2 percent growth this year.
Sarkozy’s austerity package consists largely of closing tax loopholes and scraping deductions for the country’s largest companies. But it also includes a $288 million tax hike on the country’s wealthiest taxpayers.