Gov't says economic crisis is over - Experts sceptical

PARIS (AP)

The French government has declared the economic crisis over and is promising that its budget for next year will bring growth and jobs, but experts are criticising the proposal from all sides and a true rebound looks a ways off.

In a budget unveiled yesterday, the government says it will cut the deficit by nearly €18 billion (US$24 billion), €14.8 billion of which will come from spending cuts and the rest from taxes.

The government has promised the measures will re-energise the economy, including by reducing the money spent on retirement and health benefits and by offering companies a tax credit if they hire. But taxpayers are grumbling about even the modest tax increase, and economists are split on the merits of cutting spending now, when the recovery is still weak.

"Purchasing power is our preoccupation," Finance Minister Pierre Moscovici told French television on the eve of the budget unveiling, calling it a budget for growth and employment.

Much of the criticism of the budget, however, was that it is in fact likely to hurt household spending.

Though the government argues the budget provides relief for lower-income households, economists note that the tax credit meant to boost hiring at companies is being paid for largely by a hike to the sales tax. That directly takes money out of the pockets of shoppers of all incomes.