PARIS, Dec 10: French Finance Minister Laurent Fabius, an outspoken member of the Socialist coalition who insists on budget discipline, warned again on Monday that the state must restrain spending.

Speaking against a background of unrest in public services before the launch of euro cash on January 1 and elections next year, Fabius told a conference that a rise of expenditure meant either an increase of taxation and charges or cuts elsewhere.

At the weekend the government gave way to demands by protesting gendarme police officers, promising to increase pay and expenditure on equipment.

That incited other police forces to claim improvements as well.

Last week French air traffic controllers brought traffic to a halt with a dispute, staff at the Bank of France and at the national mint have expressed discontent over conditions for the launch of euro cash, and there are signs of unrest in other public sectors, as well as in the mainly private-sector banking industry over the euro launch.

France is struggling with reduced tax income this year which has delayed a programme to move to a public surplus as required under the euro stability pact, but last week Fabius insisted the government would stand by a promise to cut taxes and to balance public finances, or come close to doing so, in 2004.

The Organization for Economic Cooperation and Development suggested recently that France will have difficulty meeting these targets unless it cuts spending.

Last year the government used most of an unexpected tax bonanza from strong growth to reduce taxation, using the rest to reduce the deficit.

Fabius told a conference on electronic administration and government at the finance ministry that although the state was not a company, it had to set a good example in managing its finances.

When new and essential public spending is begun, this means either an increase of taxation and charges or the abandonment of other spending which has been promised or is being considered, he said.

Fabius has also warned that a weak spot for the government in preparing for presidential and legislative elections in the first half of next year is the high rate of taxation and charges in France.—AFP