France to revise budget within days, amid slump

PARIS — French Prime Minister Francois Fillon said on Monday that the country is slashing its forecast for economic growth this year from 1 percent to 0.5 percent.

The move enables the government to "take into account the deteriorating economic environment" before revising the budget with a last-minute package of measures that are to go before the Cabinet next week, Fillon said.

France had stuck with the 1 percent forecast since November.

Finance Minister Francois Baroin said earlier that a slowdown had been observed "for the last three or four months."

Last week the International Monetary Fund said it forecasts the French economy to grow only 0.2 percent this year.

The lower growth figure will have an approximately €5 billion impact, Fillon told reporters, but he added that this "can be reabsorbed" because of past efforts and a prudent budget.

France is the eurozone's second-largest economy after Germany and its lagging finances could weigh on efforts to bail out weaker eurozone countries.

The updated French budget is expected to include higher consumption taxes and other measures announced by President Nicolas Sarkozy on Sunday to cut debts and boost growth.

With presidential elections in April and May, the measures must be rushed through a parliament, about to close down ahead of the voting.

Addressing criticism that the proposals are last-minute electioneering, the prime minister said there is no time for a break with the eurozone crisis at France's doorstep.

"The violence of the crisis, the commitments we've taken collectively within the eurozone, the degradation of the economic situation make the idea of a pause in reforms impossible and laughable," Fillon said.