PARIS (Reuters) ? France announced more than 18 billion euros of budget savings for 2012 and 2013 on Monday, imposing further pain on voters to protect its credit rating and curb its deficit in a gamble for President Nicolas Sarkozy six months from an election.
Sarkozy's center-right government says extra spending cuts and tax hikes are urgently needed to keep French finances from going off the rails after it cut its growth forecast for next year to 1 percent from 1.75 percent.
Analysts and opposition politicians said the government's outlook was still too optimistic and the latest measures might not be enough to keep France on its deficit reduction path.
Prime Minister Francois Fillon said French public finances had been in the red for 30 years and the time had come to break with the damaging habit of spending more than it had.
"We've got to pull out of this dangerous spiral," he told a news conference.
"To stick to the trajectory we set for deficit reduction we are going to commit to an additional effort of 65 billion euros between now and 2016, with 18.6 billion (of that) in 2012 and 2013," Fillon said.
The second package of emergency budget adjustments in just three months included accelerating the shift in retirement age to 62 from 60 in 2017, a year earlier than planned.
It also included a temporary 5 percent rise in corporate tax for firms with a turnover of more than 250 million euros, and an increase in the discounted rate of VAT sales tax to 7 percent from 5.5 percent with the exception of some items.
The latest plan foresaw savings of 7 billion euros in 2012 and 11.6 billion in 2013, when the government's target is to get the deficit to the European benchmark of 3 percent of gross domestic product before a further effort toward zero.
France is trying to reduce its budget gap from 5.7 percent of GDP this year to 4.5 percent next year.
MAKE-OR-BREAK
The announcements could be make-or-break for Sarkozy as he tries to reassure financial markets and ratings agencies without costing him his re-election chances with French voters.
Like other European countries, France is struggling to keep its public finances under control and contain its debt without triggering a sharp drop in consumer spending, a cornerstone of the economy, or sparking protests of the scale seen in other countries such as Greece.
Ratings agencies have been hinting they could cut France's prized triple-A credit rating because of slowing growth and its potential liability for the cost of bailouts in the European debt crisis.
Marc Touati, an economist at French brokers Assya, said the numbers announced by the government were big but much of the project would be for whatever government took over after presidential and parliamentary elections in the second quarter of next year.
"It is marketing to say that we will do it (reduce the deficit), but the bulk of the measures will take effect in 2012, 2013, 2014, so that means that in fact the current government may not have to take responsibility," Touati said on LCI TV.
"What is somewhat disappointing about this is that we are forgetting the main thing, which is that today we have no growth, we are on the brink of a recession, we are not even sure to reach 1 percent growth next year."
Securing a rise in the retirement age to 62 from 60 was a key political victory last year -- but a highly unpopular move -- for Sarkozy, who said it was necessary to keep France's ballooning pension deficit in check.
The transition was due to be completed by 2018 but speeding it up will generate savings faster.
Preserving France's credit rating through deficit reduction plans has been a key goal of Sarkozy, who in recent months has cast himself as a responsible steward amid the turmoil of the seemingly unending euro zone crisis.
The cuts come at a politically sensitive moment for a leader whose popularity ratings are low six months from a presidential election in which he is widely expected to seek a second term.
(Additional reporting by Nicholas Vinocur; editing by Geert De Clercq)
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