PARIS–The new French Socialist government launched tax rises and spending cuts on Wednesday to meet budget targets as growth flags, with the eurozone debt crisis burning on and Italy falling behind. The French cabinet approved action to adjust the budget with 7.2 billion euros in tax hikes and 1.5 billion euros in spending frozen this year, two days after an audit warned it has to find up to 43 billion euros just to stay on track this year and next. The cabinet acted after the government won a vote of confidence for its broad programme outlined to the national assembly on Tuesday.
In Italy, official data revealed that the public deficit in the first quarter of the year overshot to total 8.0 percent of output from 7.0 percent in the first quarter of last year. The statistics office, referring to a critical surge in the interest rate Italy must pay to borrow late last year, said the increase reflected “increased spending on interest” and reduced tax revenue because of recession in the economy. Italy, which is burdened by particularly high public debt rather than annual deficit, intends to cut its public deficit from 3.9 percent of output last year to 1.3 percent this year and 0.5 percent next year. Italian Prime Minister Mario Monti and German Chancellor Angela Merkel were to meet late on Wednesday to discuss the eurozone crisis after a landmark summit at the end of last week. The latest Italian data comes after Monti pushed crucial although diluted labour reforms through parliament just before last week’s summit, and then pushed Germany into accepted extra help for countries in trouble at an EU summit on Friday.