PARIS (Reuters) - The French government runs the risk of failing to carry out a budget savings drive as planned, so threatening its public sector deficit targets, the International Monetary Fund said on Thursday.
President Francois Hollande's government aims to find 50 billion euros in savings over the next three years, vital to bring the deficit in line with an EU-agreed target of 3 percent of GDP next year.
However, having hiked taxes since coming to power in 2012, Hollande has pledged to phase out 30 billion euros in payroll tax on companies to make them more competitive. He has also offered tax relieve for low-income households.
"Achieving the deficit objectives while delivering on the tax cut commitments leaves no room to deviate from the announced expenditure reductions," the IMF said in a regular review on the French economy.
"The major risks are that the initial plans may be diluted in sequential annual budgets and that cuts in transfers to local governments may be compensated by unsustainable cuts in investment, higher taxes or higher debt," the IMF added.
(Reporting by Leigh Thomas; Editing by Ingrid Melander and Mark John)