video transcript

Hoping to safeguard the country's position at the core of the euro zone, France's 2013 budget is its toughest single belt-tightening in 30 years. But unlike Spain which slashed government spending, Prime Minister Jean-Marc Ayrault announced massive tax hikes on big businesses and wealthy households, to raise around 20 billion euros. (SOUNDBITE) (French) FRENCH PRIME MINISTER JEAN-MARC AYRAULT SAYING: "This is a budget which also requires an effort. But it is a just effort. Income taxation will not impact the middle and working classes. Nine tax households out of ten, 90 percent of the French who pay income tax will not face higher taxation, assuming equal income. This is a guarantee that we give the French." But Justin Urquhart-Stewart of Seven Investment Management isn't convinced. (SOUNDBITE) (English) MARKETING DIRECTOR AT SEVEN INVESTMENT MANAGEMENT, JUSTIN URQUHART-STEWART, SAYING: "What you'll find is there will be more concern when they look at the broader package and the affect that's going to have on the French citizens, because remember only a few months ago promises were being given which are now being broken so this is going to go down very badly indeed. Socialist President Francois Hollande was elected on pledges to bring down unemployment. But it's now at a record high, with carmaker Peugeot expected to shed 8000 jobs, and drugmaker Sanofi cutting 900. The French economy is expected to grow by 0.8 percent with the country's deficit falling. Daragh Maher is FX Strategist at HSBC. (SOUNDBITE) (English) FX STRATEGIST AT HSBC, DARAGH MAHER, SAYING: "They seem to be making realistic projections, some unpopular decisions I would imagine domestically, and so there is going to be pain for France. But it feels like they are going to try and achieve those targets. But slippage of fiscal targets is something the market's got used to over the last few years, so if France were to slip a little bit I don't think it would be absolutely devastating." Markets fell on the announcement of the package and business leaders fear such steep tax hikes could mean an exodus of top talent. Ciara Sutton, Reuters