Prime Minister Francois Fillon announced plans on Monday to save 100 billion euros to eliminate France's budget deficit by 2016, including 500 million Euros in extra state budget savings next year.
"The time has come to adjust France's efforts. With the president, we have only one goal: to protect the French people from the serious difficulties that many European countries are now facing," Fillon said during a press conference.
"I believe that our citizens are now aware of the risks to our livelihoods and futures caused by deficits and debt. Bankruptcy is no longer an abstract term. Our financial, economic and social sovereignty require prolonged collective efforts and even some sacrifices," he said.
Fillon announced a series of budget cuts and tax hikes aimed at keeping France's finances on track and preserving its critically important triple-A credit rating.
"To reach zero deficit by 2016, which is our objective, we must save a little more than 100 billion Euros," he said.
"It is unthinkable to do this exclusively by raising taxes, as the opposition suggests. This would lead to the tripling of income taxes and the doubling of VAT."
The government's flagship reform of raising the retirement age from 60 to 62 will be brought forward from 2018 to 2017, he said.
The Value Added Tax (VAT) on many goods and services will be raised from 5.5 percent to 7.0 percent, except on essential goods such as food.
Corporate taxes will also be temporarily raised by 5.0 percent on corporations with annual turnovers of more than 250 million Euros, he said.
"Our country must not be condemned to have its policies one day imposed by others. I want to tell the French people that the budgetary and fiscal efforts that we undertake today are a choice we make for the country and for generations to come," Fillon said.
The new measures are on top of August's 12 billion euro deficit-cutting package that raised taxes on the rich and closed tax loopholes and after France revised its 2012 growth forecast from 1.75 to 1.0 percent.
President Nicolas Sarkozy had spent the weekend huddled with top ministers and advisors to devise the plan, amid rumors that France might be stripped of its triple-A rating.
Ratings agency Moody's warned last month that it may place a negative outlook on France's Aaa credit rating within three months as the government's financial strength had "weakened."
The new measures also come as centre-right Sarkozy seeks to shore up his economic credentials six months ahead of a presidential election.
Sarkozy is lagging in the polls behind Socialist challenger Francois Hollande, who has been mounting a strong challenge from the left.
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