France hikes taxes to tame budget deficit

The French socialist government yesterday unveiled the country's 2013 budget aimed at cutting the budget deficit of the eurozone's second-largest economy by boosting taxes on the wealthiest households and corporations.

President Francois Hollande's first budget targets to cut budget deficit to 3 per cent of the country's gross domestic product (GDP) next year from an estimated 4.5 per cent in 2012.

According to government, the move is ''crucial'' to keep the country insulated from the spiraling eurozone debt crisis. Other major eurozone nations Spain and Italy have already adopted stringent austerity measures to tame their public deficits.

French prime minister Jean-Marc Ayrault said, "If we don't put a stop to this, taxpayer money will keep paying for debt reimbursement."

France's budget deficit rose sharply from 3.4 per cent of GDP in 2008 to 7.5 per cent in 2009 before improving to 5.8 per cent in 2011.

The country's public debt that was 68 per cent in 2008 is expected to reach a peak of over 91 per cent in 2013 before easing to lower levels in subsequent years.