Hollande taxes the rich - but cuts spending

"It's a combative budget aimed at cutting the deficit, improving our economic performance and restoring fairness," Mr Hollande claimed, stressing that "the richest households" and the biggest companies would bear the brunt of the pain.

The budget breakdown indicated €36.9 billion (£29.4bn) in savings if France is to reduce its deficit from around 4.5 per cent of GDP this year to the EU ceiling of 3 per cent in 2013.

One-third will come in spending cuts, with the rest in new or higher taxes on the wealthy and big companies, including a 75 per cent tax on incomes over €1 million (£800,000).

The 75 per cent tax will only last for two years, but it has infuriated businessmen and opposition politicians alike, who claim that it sends the message that France doesn't like the rich and isn't open for business.

Among the measures are a new income tax rate of 45 per cent for those on over €150,000 (£120,000) a year, an increase in capital gains taxes and a cap on some deductions for large companies on their income taxes.

But the savings target also includes €12.5bn (£10bn) of cuts - €2.5bn (£2bn) on health spending and €10bn (£8bn) across other government departments.

A total of €10bn will come from extra taxes on individuals and a further €10bn from business taxation.

That is in addition to €4.4bn (£3.5bn) of new taxes announced in July.

Prime Minister Jean-Marc Ayrault claimed the budget would ensure France could continue to finance its high level of debt at historically low interest rates, although figures released today revealed that the national debt had risen to 91 per cent of GDP.

"This is a serious budget, it's a leftist budget and it's a fighting budget," said Finance Minister Pierre Moscovici.

But others were not so sure that it would achieve its objectives.

"A 1.5 per cent reduction of the deficit represents a considerable effort at the best of times.

"In a period of zero growth it would be exceptional," said Elie Cohen, director of research at government-financed think tank CNRS.