'Confident' Chirac promises further tax cuts

4th January 2005, Comments 0 comments

PARIS, Jan 4 (AFP) - French President Jacques Chirac on Tuesday pledged further income tax cuts next year and voiced confidence in the French economy despite a new report that momentum ground to a halt in the third quarter of 2004.

PARIS, Jan 4 (AFP) - French President Jacques Chirac on Tuesday pledged further income tax cuts next year and voiced confidence in the French economy despite a new report that momentum ground to a halt in the third quarter of 2004.

In a New Year's presentation at the Elysee Palace, Chirac also said the minimum wage would rise at least five percent from July 1 and expressed optimism about France's future in the face of high oil prices and the "excessive weakness" of the dollar.

The weaker dollar and the fast appreciating euro have alarmed eurozone political leaders who fear the trend will hamper eurozone exports and thwart economic recovery.

"I am confident in the growth dynamic of our country for the months and years to come," Chirac said. The government has set a forecast of 2.5 percent gross domestic product growth for this year.

He said income tax reductions would resume next year after a pause in 2005 as part of an initiative to ease the tax buden on French wage earners by 33 percent between 2002 and 2007.

Chirac promised a reform of the professional tax as well as new tax measures to encourage long-term investment in stock markets.

"I am asking the government to study in particular a fiscal adjustment, to tax more heavily the purchase of a share in order to sell it quickly, but to ease taxes for the long-term investor," Chirac said.

His message came as the national statistics institute INSEE said the French economy stalled in the third quarter compared to the previous three months.

That compared with a quarterly growth rate of 0.6 percent in the second quarter.

The third quarter reading - the third estimate for third-quarter French gross domestic product - fell short of most forecasts for a rise of 0.1 percent.

France, as a member of the eurozone, has been struggling to honor its obligation, outlined in the 1997 Stability and Growth Pact, to hold its public deficit to less than three percent of gross domestic product.

Chirac on Tuesday insisted that the "the implementation of the pact should not aggravate the situation of a country in recession or in a period of weak growth."

"We must also take into account the nature of public spending," he said, arguing that expenditures on defence or research and innovation should received "special treatment."

Critics of the pact contend that its application can act as a constraint on economic stimulation, particularly during periods of sluggish growth.

© AFP

Subject: French News

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