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France embraces shock therapy for ailing economy

Published on Nov 6, 2012 8:29 PM

PARIS (AFP) - France on Tuesday unveiled 20 billion euros ($39 billion) in tax breaks for businesses, bowing to pressure to address the flagging competitiveness deemed to be at the heart of the country's economic malaise.

The tax breaks will take the form of credits applied to company earnings for three years from next year and will affect public finances from 2014-16.

Designed to offset the cost to companies of France's high payroll taxes, they will be financed by a combination of cuts in public spending and increases in sales taxes (VAT).

Prime Minister Jean-Marc Ayrault said the government had decided to implement virtually all of the "shock" measures recommended in a report drawn up by industrialist Louis Gallois and presented to the Socialist administration on Monday.

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