France vows 'unprecedented' spending cuts in 2014 budget

France vowed "unprecedented" cuts in public spending to rein in its deficit without compromising much-needed growth, as it unveiled its draft 2014 budget on Wednesday. The pledge came as new figures showed the number of registered job seekers in France fell for the first time in more than two years. But critics on either side of the political spectrum remained sceptical that the cost-cutting would alleviate hardship in the Eurozone's second largest economy, which is grappling with record-high unemployment, limited investment and low consumer spending. Finance Minister Pierre Moscovici and Budget Minister Bernard Cazeneuve presented the draft budget to the cabinet, outlining 15 billion euros ($20 billion) worth of cuts. "We prefer to find savings rather than increasing taxes," Moscovici and Cazeneuve said in their introduction to the draft budget. Some 80 percent of savings next year will come from cuts in public spending, which is far higher in France than in its main European partners, and only 20 percent from a rise in taxes. State spending will reach 57.1 percent of GDP this year, and is expected to drop to 56.7 percent in 2014. The two ministers said outgoings excluding debt interest and pension payments would fall in absolute terms by 1.5 billion euros from 2013 levels -- a reduction they described as unprecedented for post-war France. Public debt, meanwhile, will reach a record 95.1 percent of GDP in 2014 -- far higher than previous government estimates -- before falling back again the following year. The ministers reiterated a pledge that France's public deficit would gradually drop, meeting the 2015 EU-mandated deadline to bring it below three percent. These decisions are all based on predictions of 0.9 percent economic growth next year and 0.1 percent in 2013 -- compared to zero growth in 2012. In a signal that there could be light at the end of the tunnel finally, the labour ministry said the number of registered job seekers fell by 50,000 to 3.23 million at the end of August. Labour Minister Michel Sapin however said a lasting turnaround in unemployment promised by the Socialist government and President Francois Hollande had not yet been achieved. "The results of one month do not represent a turnaround," Sapin said in a statement. However, he welcomed what he termed a "significant" drop in a country where unemployment affects nearly 10.9 percent of the active population. The fall in registered job seekers was the first since May 2011. Critics meanwhile blasted the budget, saying it would not help French people already seriously battered by the ongoing financial crisis. Jean-Luc Melenchon, figurehead of the far-left, said the spending cuts just added to previous, huge cuts already implemented by the Socialist government since Hollande came to power last year. "We must end this policy that continuously increases the suffering of the people and leads to economic, social and political disaster," he said in a statement. Valerie Pecresse of the main opposition right-wing UMP and a former budget minister, said there were no real "savings" in the draft and that spending was being stabilised rather than decreased. "This budget is an anti-spending power budget and therefore an anti-growth budget," she said on France 2 television. The government, however, said it expected consumers' purchasing power to rebound, with growth of 0.3 percent this year and 0.8 percent in 2014 -- compared to a drop of 0.9 percent in 2012. Hollande said the draft budget -- which still needs to be approved by parliament -- encouraged "a return to growth and employment." Among taxes outlined in the draft, a new one percent tax on the gross operating surplus of companies with more than 50 million euros in turnover sparked controversy among a business community already worried about low investment in France. In terms of jobs in what critics regard as France's bloated public sector, the budget is broadly neutral. Although 13,123 jobs are to be eliminated in non-priority ministries, there are plans to create nearly 11,000 others in education, the justice department and the police.