France Unveils Tough Austerity Plan

The French government unveiled tough new austerity measures Monday as fears grow that Europe's fiscal problems may touch new members of the 17-nation eurozone.

French Prime Minister Francois Fillon warned that billions of euros in spending cuts and tax hikes amount to some of the toughest in more than half a century, as he unveiled them on Monday.

Fillon said the word "bankruptcy" was no longer an abstract term at a press conference where he unveiled the measures. He said France's economic, financial and social sovereignty demanded collective effort and even some sacrifices.

The plan includes raising the official retirement age to 62 by 2017 -- a year earlier than expected. Other measures include raising value-added and business taxes, with an overall goal of eliminating the country's budget deficit by 2016.

Coming six months ahead of presidential elections, the plan is likely to further erode French President Nicolas Sarkozy's already record-low popularity ratings.

The main opposition Socialist Party was swift to criticize the cuts along with union leaders. Force Ouvriere Union leader Jean-Claude Mailly slammed the austerity plan for hurting ordinary taxpayers. What France and other European countries need isn't more austerity, he said, but economic growth.

That sentiment is shared by analysts like Simon Tilford, chief economist at the Center for European Reform in London.

"The [French] recovery has already ground to a halt and it's sliding back into a recession," he said. "That is not the time that any government should be cutting spending. All that risks doing is pushing the economy further into recession."

The austerity measures come as neighboring Italy threatens to become the latest victim of the spreading eurozone crisis.

"It's not beyond the realms of possibility that in a few months time France could find itself in a similar position to the one in which Italy finds itself now," said Tilford.

France's belt tightening takes place just days after President Sarkozy presided over a G20 summit in Cannes dominated by the European debt problems -- with Greece and Italy on the front lines of the crisis.