* Budget sees 0.9 pct GDP growth, deficit at 3.6 pct of GDP
* Focuses on savings, but households still see tax hikes
* Businesses will see smaller tax burden
* French finance minister in Brussels on Thursday
By Ingrid Melander and Leigh Thomas
PARIS, Sept 25 France sought on Wednesday to
appease public anger over tax hikes and EU concerns over its
finances with a 2014 budget bill that focuses largely on finding
But while businesses will face a smaller tax burden to help
boost competitiveness, households will be hit by higher taxes to
help cut the deficit, a move that could hurt purchasing power.
The Socialist government's 2014 budget bill faces close
scrutiny from the European Commission and EU powerhouse Germany,
which have given Paris two extra years to bring the deficit in
line with EU rules but want to see more reforms and a credible
plan to cut spending.
The budget "has two objectives: stimulate growth and boost
jobs," Finance Minister Pierre Moscovici said as he announced a
public deficit target of 3.6 percent of economic output, less
than this year's 4.1 percent but bigger than initially forecast.
The government has planned 15 billion euros ($20 billion) in
savings next year and 3 billion extra revenues from higher taxes
and fighting tax evasion. It also aims to collect another 6
billion euros from a previously announced sales tax increase.
But rating agencies and analysts have cast doubt on France's
ability to switch its budget focus from tax hikes to reining in
spending, noting the euro zone's second-largest economy has a
poor track record on the latter.
The government, which sees gross domestic product (GDP)
growing 0.9 percent next year, says the budget puts it on track
to cut its public deficit below the EU cap of 3 percent of GDP
in 2015, but France's new fiscal watchdog warned of risks that
revenue estimates were too high and spending forecasts were
"Your growth forecast is plausible but the macroeconomic
scenario is fragile, especially in terms of employment," the
head of the fiscal watchdog, Didier Migaud, said.
Dogged by months of steadily rising jobless figures, the
government is counting on employment to grow 0.6 percent next
year after an estimated 0.1 percent fall this year.
Data released on Wednesday showed that jobless claims fell
in August for the first time in over two years, although this
was due partly to subsidised jobs and an unusually high number
of people dropping off the register.
Businesses and voters have been hit by 70 billion euros in
tax hikes over the past three years and Moscovici himself has
talked of "tax saturation" among the general public.
The government, worried about next year's local and EU
elections, insists the 2014 tax rises are much smaller than in
But next year the government expects to collect 75.3 billion
euros in income tax compared to 71.9 billion in 2013, and the
sales tax rise will also hurt households.
"They're putting into practice a strategy to preserve or
improve businesses' competitiveness at the expense of consumers'
purchasing power," BNP Paribas economist Dominique Barbet said.
Moscovici will travel to Brussels on Thursday to discuss the
budget with EU Monetary Affairs Commissioner Olli Rehn, who said
earlier this week France should speed up reforms.
The government announced a change in corporate tax policy by
scrapping an annual flat tax on top of other levies and
introducing a new one based on operating profits.
It will, as planned, slap a 75 percent tax on salaries
exceeding 1 million euros per year, a rate that includes social
contributions and will be levied on firms.
Overall, businesses will see a stable tax level next year,
but the burden will end up being smaller thanks to 10 billion
euros in tax breaks meant to boost competitiveness.
A new carbon tax will bring in 340 million euros in 2014,
rising gradually to 4 billion euros in 2016.