PARIS, Sept 28: France on Friday unveiled shock fiscal action to plug a 37-billion-euro hole in public finances with the toughest package of tax rises and spending cuts the country has known in an economic downturn. The 2013 budget adopted by President Francois Hollande’s cabinet commits the ruling Socialists to an austerity programme at a time when the economy is teetering on the brink of recession.

Hollande defended measures that included a 75 per cent top tax rate as fair and unavoidable if France is to get its finances under control, meet EU deficit targets deemed essential to save the euro and kickstart the faltering economy.

“It’s a combative budget aimed at cutting the deficit, improving our economic performance and restoring fairness,” Hollande told his ministers, stressing that “the richest households” and the biggest companies would bear the brunt of the pain.He also pledged there would not be “one more euro” of debt at the end of his five-year term.

But opposition critics derided a budget that will take billions out of the economy at a time when unemployment is close to record highs and contested government claims that only the richest ten per cent would pay higher taxes.

“France is headed into the wall,” warned Bruno Le Maire of the main opposition UMP party. Former budget minister Valerie Pecresse asserted: “This budget means 100 per cent of French workers will be paying higher taxes.”

The powerful CFDT union however hailed it as “an important step towards fiscal justice.”

The budget breakdown indicated that France needs to make 36.9 billion euros ($48 billion) in savings if it is to meet its target of reducing its budget deficit from an anticipated level of 4.5 per cent of GDP this year to the EU ceiling of three per cent in 2013.

Economists are sceptical about the government’s ability to meet the deficit target and have warned that the dampening effect of cuts and tax hikes will make it difficult to attain the growth (0.8 per cent for 2013, rising to 2.0 per cent in 2014) on which the budget figures are based.

The economy is currently flat-lining and latest data point to that trend continuing into the winter.—AFP