France lowers growth forecasts

The French prime minister, Francois Fillon, Wednesday lowered his forecast for economic growth and introduced new spending cuts.

His government had predicted growth of two per cent this year and 2.25 per cent in 2012. Those were targets considered overly optimistic by most economists.

Fillon now estimates that the French economy will grow 1.75 per cent this year and by the same rate the next.

He blamed the international economic slowdown for France's failure to achieve the two per cent growth this year that Finance Minister Francois Baroin said only last week was still within reach.

Fillon also announced a mix of spending cuts and tax hikes to save roughly €14 billion ($19.9 billion Cdn.) over two years.

Wealthy to pay €200M more

The austerity package consists largely of closing tax loopholes and scraping deductions for the country's largest companies. But it also includes a €200 million ($280 million) tax hike on the country's wealthiest taxpayers via a three per cent "exceptional contribution" on incomes over €500,000 ($700,000).

Fillon told journalists Wednesday that the measures are to make sure the government meets its pledge to cut its deficit for the country's 2012 election year budget.

French President Nicolas Sarkozy has pledged to his European partners and France's creditors to bring down the country's deficit to 5.7 per cent of national income this year — down from 7.1 per cent last year — and to 4.6 per cent in 2012.

But some analysts say those goals seem increasingly unrealistic after the country's economy stalled in the second quarter.

France has not managed to balance its budget in three decades.