* Hollande trying to pull economy out of stagnation
* Housing starts at 16-year low
* Tax relief expected after court rejected payroll rax cut
PARIS, Aug 19 (Reuters) - The French government will announce measures soon to boost construction and give tax relief to low income households, a minister said on Tuesday as President Francois Hollande tries to pull the economy out of stagnation.
Real estate has become a major headache for the government, with housing starts in France down to a 16-year low - a serious drag on the economy which property developers blame partly on regulations that took effect this year to set rent limits in cities with more than 50,000 people.
Tax relief has been expected since the government said it would find a replacement solution for payroll tax cuts struck down by France’s top court this month.
“Urgent measures will be announced soon,” Junior European Affairs Minister Harlem Desir told BFM TV. “We will, in the coming days, propose a new tax relief measure for low-income households.”
Desir declined to say if any of these measures would be announced on Wednesday at the government’s first cabinet meeting after the summer break. He said discussions were ongoing on options including increasing welfare benefits.
“We cannot accept that housing remains stranded,” he said, adding that the sector was a priority to kick-start the economy and create jobs.
France slashed its growth forecasts for both 2014 and 2015 last week and said it would miss its public deficit target this year after data showed the economy delivered no growth for the second quarter in a row.
Desir also reiterated French calls for European Union peers to give France some more leeway on meeting its deficit targets and for the EU and its central bank to do more to boost growth.
“The ECB must have a bolder policy,” he said, also repeating calls for a “major” European investment plan. He asked for more details on a pledge by incoming European Commission President Jean-Claude Juncker for a 300-billion-euro public-private investment programme over the next three years. (Reporting by Ingrid Melander and Jean-Baptiste Vey; Editing by Dominique Vidalon and Andrew Heavens)