THE FRENCH government has presented a tough austerity budget that targets €11 billion in savings, hoping it will be enough to protect the country’s triple-A credit rating.

France has not balanced a budget since 1974, but the government yesterday laid out ambitious plans to reduce the public deficit from 5.7 per cent this year to 4.5 per cent in 2012. It then aims to reduce it to the EU limit of 3 per cent in 2013.

The budget is based on a growth forecast of 1.75 per cent for 2011 and 2012, but some believe this figure – the result of a recent downward revision – may still be optimistic in light of new data yesterday that showed the economy stagnated in the second quarter.

President Nicolas Sarkozy faces an election next spring but has pledged not to stray from official deficit targets and is determined not to be the president who loses the prized triple-A rating.

Passing the budget bill could prove more complicated than in recent years for his government after the Socialist Party-led opposition won a majority in the senate last weekend, giving it the ability to delay legislation.

Under a savings package published last month, the government said it aimed to raise an extra €10 billion in 2012 and cut €1 billion from spending.

Yesterday’s bill seeks to set the deficit-reduction targets in law.

“We are being scrutinised. We have to keep our promises and keep France’s word and stay the course on public finances,” budget minister Valérie Pécresse told journalists.

Under the package, the government plans to scrap a host of tax exemptions and impose an additional 3 per cent tax on people with incomes of more than €500,000 a year.

It also aims to align its rules on carrying forward tax credits on corporate losses with those in Germany and raise taxes on tobacco, strong alcohol and fizzy drinks. The cost of overseas military operations is expected to fall as France begins withdrawing its troops from Afghanistan.

Ms Pécresse urged senators to respect the deficit reduction plans, but indicated that the government would be willing to compromise on demands from some that the level of the wealth tax threshold be reduced to annual incomes of more than €250,000.

The budget estimates that France’s total, accumulated debt will be higher than previously expected, largely because of its contribution to rescue funds for Greece, Ireland and Portugal. Already expected to reach a record 85.5 per cent of GDP this year, accumulated debt will hit 87.4 per cent in 2012 – half a percentage point higher than the previous estimate.