French President, Nicolas Sarkozy, announced new measures which include the increase of taxes on companies and wealthiest to cut the country's huge budget deficit which along with the sluggish growth made it prone to a downgrade risk.

The plan, announced by Prime Minister Francois Fillon yesterday, will involve 12 billion euros of measures this year and next to reduce the deficit to 4.5% of GDP in 2012 from 7.1% in 2010, adding that spending will be slashed by 500 million euros this year and 1 billion euros in 2012.

Also, Fillon has cut the country's growth forecasts to 1.75% in 2011 and 2012 from 2% and 2.25% this year and next respectively.

Sarkozy is in a difficult situation as he aims to save his country's top rating which is at risk while improving economic conditions before elections.