The new French Finance Minister Thierry Breton has cut the country’s growth forecast for this year, but he has also pledged to bring the budget into line with euro zone rules despite public pressure for pay rises. At his first policy conference since taking on the job two weeks ago Breton said: “Our plan for the public deficit this year is that it will be less than the 3% (EU stability pact) limit, it will be 2.9% as the government promised and we will stick to that.” He also announced tax measures designed to encourage French companies to pay out larger performance bonuses from their greatly improved earnings last year in order to give workers more purchasing power.Other tax breaks are intended to boost incentives for firms to invest in research and development. The French unemployment rate is at its highest in five years, which is having an impact on consumer spending and Breton admitted economic growth could fall well short of the government’s 2.5% target this year. He was speaking six days after major demonstrations organised by the French trade unions demanding higher pay for workers. Addressing their grievances the Finance Minister called for boosting the buying power of consumers.
France admits 2005 growth will be lower than forecast