A €20bn (£16bn) package of tax breaks has been announced by French Prime Minister Jean-Marc Ayrault in an attempt to reverse the country’s spiralling fortunes and boost its competitiveness.
The move will be in the guise of tax credit and is set to be financed by €10bn in spending cuts and a €10bn increase in VAT from 19.6% to 20% and environmental taxes. Restaurant taxes will also rise by 3%.
Ayrault rejected a recommendation to cut employer wage taxes made in a report by French industrialist Louis Gallois, the former head of the European aerospace and defence group EADS, which called for dramatic action be taken to boost its flagging economy.
President François Hollande’s seven month-old government is afflicted by a rising unemployment rate of over 10% and a record trade deficit of €70bn last year.
The country’s woeful economic performance is in stark contrast to EU powerhouse, Germany, which enjoyed a 22% upswing in intra-EU exports in 2011while France recorded 9.3%.
The ongoing frailty of France's economic health has seen over two million people lose their jobs within the past three decades, the report revealed.
On Monday, the International Monetary Fund drew attention to France's "lack of competitiveness" as "a major stumbling block to its economy recovery.
In August, the French finance ministry published its second 2012 supplementary finance bill (PLFR) in a bid to offset the spiralling budget deficit and increase the tax take by around €7.2bn (£5.7bn) this year.
The ministry said that the forecast for economic growth has been revised downwards to 0.3%, noting that given the economic slowdown, tax revenues have also been revised downwards by €7.1bn.
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