New Prime Minister Dominique de Villepin said today he would halt income tax cuts and all spare money in the budget would go to efforts to reduce France's high unemployment rate.
"All spare money in the budget will be dedicated to jobs: this choice means we will have to suspend income tax cuts," Mr Villepin said in a speech to parliament setting out his new government's policy.
President Jacques Chirac vowed in the presidential election campaign in 2002 to cut income tax by a third during his five year term. So far he has reduced it only by around 10 per cent.
Mr Villepin said France was committed to its spending targets, saying public spending would be capped in 2006 and would not rise by more than inflation. "Our public spending commitments will be respected and spending will not develop more quickly than inflation in 2006," he said.
Mr Villepin said France needed growth in order to create jobs. "To create jobs, we first need growth," he said. "I will use all the tools that favour investment and purchasing power in a responsible way."
Mr Villepin announced several measures to help very small firms, including a plan to extend the trial period for new workers to two years. France is to set aside an extra €4.5 billion for jobs next year, he said.