France to tackle crushing debt, says French PM Ayrault

French Prime Minister Jean-Marc Ayrault addresses the National Assembly in Paris Mr Ayrault is outlining the new government's plans to parliament for the next five years

French PM Jean-Marc Ayrault has called on the French people to rally behind the government to tackle a "crushing" and "unprecedented" debt crisis.

He is outlining the new Socialist government's plans in a keynote speech to parliament for the next five years.

He confirmed those earning more than 1m euros (£800,000) would be taxed at 75%.

Mr Ayrault also said gay couples would be allowed to get married and to adopt children from next year - an election pledge made by President Hollande.

According to a poll carried out at the beginning of the year, 63% of French people are in favour of gay marriage and 56% in favour of gay adoption.

Mr Ayrault added the proportion of nuclear power in the production of electricity would be reduced from 75% to 50% by 2025.

He promised people on lower incomes would be spared the brunt of budget cuts and tax increases.


The prime minister's speech was a delicate verbal balancing act. The new socialist government was elected on promises to end austerity and stimulate economic growth. But after the state auditors' grim assessment of public finances this week, budget cuts now appear inevitable - and they are certain to be unpopular.

So Mr Ayrault insisted there would be no return to austerity, while at the same time pledging that France would meet its deficit reduction goals thanks to tax increases. But the national audit office has said that seems impossible. France needs to find a colossal 43bn euros this year and next, which suggests that severe cuts will also have to be made.

Economists are pointing out that it is not certain that the 75% income tax on the super-rich will bring more money into the state's coffers. It is feared that there could be an exodus of high earners. Tax increases may keep France on track to meet the deficit targets in the short term, but the new government may well find itself with no choice but to make deeper structural reforms further down the line.

He also said his government would go ahead with plans to hire thousands more teachers and police, as well as creating 150,000 state-aided jobs. The moves are some of the other election pledges made by newly elected President Francois Hollande.

He also said he would not be introducing austerity measures, and that a number of summits - on social issues, the environment, education - would be held in the next few weeks.

"The path towards budgetary stability is the one that we highlighted and it is the one that we will take. I am calling for seriousness and budgetary responsibility."

Balancing the books

Mr Ayrault revised France's economic growth forecasts. He said GDP was likely to grow 0.3% this year, down from 0.5%, and 1.2% in 2013 instead of a previously expected 1.70%.

"The state pays nearly 50bn euros to its creditors annually," Mr Ayrault said, adding that the debt burden was threatening the welfare system and public services.

Mr Ayrault said the aim of the belt-tightening was to have a balanced budget in 2017, adding that between 2007 and 2011, France's debt grew by 600bn euros "to nearly 1,800bn euros today, or 90% of the wealth produced annually in France".

A public investment bank would to be created before the end of this year to help industrial innovation.

Auditors warned this week that the French government needed to fill a hole of up to 10bn euros in this year's budget to meet targets to cut the deficit.

Last week, it was announced that France's public debt rose by 74bn euros in the year's first quarter, bringing French public debt to 89% of GDP.

Mr Ayrault blamed the country's economic situation on the previous centre-right government of ex-President Nicolas Sarkozy.

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