A new wave of 2012 budget saving measures designed to help France meet its deficit reduction targets will include speeding up its higher retirement age, a newspaper reported on Sunday.

Last week, France lowered its growth projections for next year to 1 percent from 1.7 percent -- raising the need for further belt-tightening measures by the centre-right government of President Nicolas Sarkozy.

That saving plan, to be announced on Monday, will include accelerating the transition to the retirement age of 62 in either 2016 or 2017, instead of 2018, Les Echos newspaper reported on its website on Sunday.

Pushing back France's retirement age to 62 from 60 was a key victory for Sarkozy last year, but a highly unpopular move that met with massive street protests.

This measure, which is very heavy to bear politically, will constitute a strong signal for the credit rating agencies, wrote the paper in an article to be published on Monday.

While any impact on the 2012 budget will be limited, the government could save several billion euros in retirement benefits beginning in 2013, it said.

Prime Minister Francois Fillon is expected on Monday to announce an extra 6 to 8 billion euros ($8-$11 billion) in cuts and tax hikes to keep deficit reduction goals on track and safeguard France's prized triple-A credit rating despite the lower growth.

Government ministers spent the weekend preparing the public for the new cuts, which are above and beyond 11 billion euros of cuts already laid out in August for the 2012 budget.

The government wants to reduce its budget gap from 5.7 percent of GDP this year to 4.5 percent in 2012, and eventually to the EU limit of 3 percent in 2013.

The 2012 budget will be one of the most rigorous budgets that France has seen since 1945, Fillon said on Saturday, adding France's hour of truth has arrived.

On Sunday, Finance Minister Francois Baroin said France will do all it can to reach its revised target of 1 percent growth for next year. He also sounded a cautious note, given the wider European environment.

We are adapting to this economic slowdown, Baroin told RTL radio on Sunday, defending the government's handling of a euro zone crisis that has rattled markets and put France's own triple A credit rating at risk.

Caution is required in France, it's required in Germany which herself corrected growth forecasts in the same proportions as we did with the same estimates as ours, said Baroin.


The belt-tightening comes at a politically difficult time for Sarkozy, whose popularity ratings are low six months before a presidential election in which he is widely expected to seek a second term.

Sarkozy has made deficit reduction a key goal of his presidency and has sought to cast himself as a responsible steward of France amid the turmoil of the seemingly unending euro zone crisis.

Last month, Moody's Investors Service warned it was scrutinising the outlook on France's credit rating in light of slower economic growth and costly commitments to euro zone bailouts --- ramping up the pressure on Sarkozy to keep spending in check.

Baroin said the savings would come half from cost-cutting, and half from additional taxes, with ministers stressing that the cuts would be equitable.

Everyone will contribute according to their own capacity, Budget minister Valerie Pecresse told M6 television.

Le Journal du Dimanche newspaper said on Sunday the cuts could include raising France's VAT rates in certain sectors from 5.5 percent to 7.0 percent, while slapping a new corporate tax on businesses with annual revenues over 500 million euros.

Ministers sought to fend off suggestions that the extra spending cuts pointed to a slipshod performance by the government in its first 2012 budget.

Francois Hollande, Sarkozy's Socialist challenger for the presidency, said on Saturday a potential hike in the VAT rate would be the proof of inconstancy, political incoherence.

Sarkozy's government lowered VAT rates in 2009.

On Sunday, Foreign Minister Alain Juppe said France had been forced to adapt to changing conditions as the euro zone crisis worsened in Europe. France's earlier budget was genuine, said Juppe. We are not doing makeshift repairs or patchwork.

(Additional reporting by Sophie Louet; Editing by Peter Graff)