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President Nicolas Sarkozy's government on Wednesday unveiled a first budget since taking office that shied away from attacking France's huge deficit despite warnings that the state was bankrupt.
Prime Minister Francois Fillon caused a stir last week when he said the nation was "in a situation of bankruptcy" after decades of accumulated budget deficits and called for a change in mindset.
But the budget presented at a cabinet meeting showed a state deficit for 2008 of 41.7 billion euros (59 billion dollars) -- slightly lower than last year's hole.
The national debt hovering at more than one trillion euros is to level off at 64 percent of France's gross domestic product (GDP) in 2008, from 64.2 percent this year, according to budget forecasts.
"We have a slight reduction, this means we are not far from stabilisation," said budget minister Eric Woerth, who rejected suggestion that the government was considering belt-tightening measures.
"This is a budget of forward-looking investment," said Woerth. "I absolutely do not believe that we need a so-called austerity plan."
Sarkozy has also brushed aside predictions that France will have to drastically rein in spending and argued that economic growth was key to filling state coffers.
The budget is "to restore the value of hard work, create wealth and economic activity," Sarkozy told the cabinet meeting, according to the government spokesman.
The overall deficit -- which includes social security, local government budgets and the state budget -- will inch downwards to 2.3 percent of GDP for 2008 from 2.4 percent of GDP in 2007, according to the government.
France, the eurozone's second largest economy, has come under pressure from its European partners to rein in public spending and meet a 2010 target for a balanced budget.
In Brussels, the European Commission said it was too soon to comment on the budget but noted it was keeping a close eye on French public finances to "stop slippage".
Commission spokeswoman Amelia Torres reiterated that the 2010 target for a balanced budget was "a wise objective." The government has said it hopes to balance its books in 2012
The French government continues to bank on a growth figure of 2.25 percent for 2007 despite projections from the commission and the Organisation for Economic Cooperation and Development showing it will climax at 1.8 or 1.9 percent.
The budget forecast growth of between 2.0 and 2.5 percent for the following year.
Sarkozy last week unveiled plans to overhaul pensions for some public employees and to streamline the civil service, the boldest moves yet in his reform agenda since taking office four months ago.
Some 22,900 public servants who are retiring will not be replaced next year, generating savings of 458 million euros.
Sarkozy's plans for pension reform have antagonized unions who have called a strike for October 18.
Fillon, who has issued several warnings about the dire predicament of French public finances, said the budget coupled efforts to boost growth with a "better control of expenditures."
But opposition Socialists accused the government of causing a money haemorrhage when parliament voted through a package of tax cuts promised by Sarkozy during his election campaign.
The government said the tax breaks will cost the state 8.9 billion euros this year but the Socialists have put the figure at 15 billion euros.
Socialist Party leader Francois Hollande said the government would defer tough spending cuts until next year to avoid popular discontent ahead of municipal elections in March.
"We are the only country of the euro-zone that is drowning in deficits while all of our partners are on the road to a balanced budget, even surpluses," said Hollande.
France's trade deficit is expected to widen, reaching a record 31.7 billion euros this year and 34.6 billion euros in 2008, despite a growth in exports.
Sarkozy's first budget unveiled in 'bankrupt' France
Prime Minister Francois Fillon caused a stir last week when he said the nation was "in a situation of bankruptcy" after decades of accumulated budget deficits and called for a change in mindset.
But the budget presented at a cabinet meeting showed a state deficit for 2008 of 41.7 billion euros (59 billion dollars) -- slightly lower than last year's hole.
The national debt hovering at more than one trillion euros is to level off at 64 percent of France's gross domestic product (GDP) in 2008, from 64.2 percent this year, according to budget forecasts.
"We have a slight reduction, this means we are not far from stabilisation," said budget minister Eric Woerth, who rejected suggestion that the government was considering belt-tightening measures.
"This is a budget of forward-looking investment," said Woerth. "I absolutely do not believe that we need a so-called austerity plan."
Sarkozy has also brushed aside predictions that France will have to drastically rein in spending and argued that economic growth was key to filling state coffers.
The budget is "to restore the value of hard work, create wealth and economic activity," Sarkozy told the cabinet meeting, according to the government spokesman.
The overall deficit -- which includes social security, local government budgets and the state budget -- will inch downwards to 2.3 percent of GDP for 2008 from 2.4 percent of GDP in 2007, according to the government.
France, the eurozone's second largest economy, has come under pressure from its European partners to rein in public spending and meet a 2010 target for a balanced budget.
In Brussels, the European Commission said it was too soon to comment on the budget but noted it was keeping a close eye on French public finances to "stop slippage".
Commission spokeswoman Amelia Torres reiterated that the 2010 target for a balanced budget was "a wise objective." The government has said it hopes to balance its books in 2012
The French government continues to bank on a growth figure of 2.25 percent for 2007 despite projections from the commission and the Organisation for Economic Cooperation and Development showing it will climax at 1.8 or 1.9 percent.
The budget forecast growth of between 2.0 and 2.5 percent for the following year.
Sarkozy last week unveiled plans to overhaul pensions for some public employees and to streamline the civil service, the boldest moves yet in his reform agenda since taking office four months ago.
Some 22,900 public servants who are retiring will not be replaced next year, generating savings of 458 million euros.
Sarkozy's plans for pension reform have antagonized unions who have called a strike for October 18.
Fillon, who has issued several warnings about the dire predicament of French public finances, said the budget coupled efforts to boost growth with a "better control of expenditures."
But opposition Socialists accused the government of causing a money haemorrhage when parliament voted through a package of tax cuts promised by Sarkozy during his election campaign.
The government said the tax breaks will cost the state 8.9 billion euros this year but the Socialists have put the figure at 15 billion euros.
Socialist Party leader Francois Hollande said the government would defer tough spending cuts until next year to avoid popular discontent ahead of municipal elections in March.
"We are the only country of the euro-zone that is drowning in deficits while all of our partners are on the road to a balanced budget, even surpluses," said Hollande.
France's trade deficit is expected to widen, reaching a record 31.7 billion euros this year and 34.6 billion euros in 2008, despite a growth in exports.
Sarkozy's first budget unveiled in 'bankrupt' France
