France's tax policy has 'reached limits of acceptability': EU chief

Protestors wearing a red bonnet demonstrate against job losses and against the government's "eco-tax," a controversial environmental tax on heavy goods vehicles, on November 2, 2013 in Quimper, western France.

France's fiscal policy has "reached the limits of acceptability," with high company taxes weighing on growth, the head of the European Commission told French television late Monday.

Even though France's proposed budget is "overall satisfactory," José Manuel Barroso told the LCI network: "Today, the fiscal policy in France has reached the limits of acceptability.

"France is by far the country (in the EU) where companies pay the highest taxes and that's a problem for growth and employment."

He urged Paris to "reduce public spending," while noting that some effort in that direction was included in the proposed budget.

The European Commission on Friday is to give its evaluation of each country in the euro zone in a new measure implemented as part of the effort to stabilize the fragile single currency area.

Rating agency S&P last week downgraded French debt by one notch and expressed concerns about policies to reduce the public deficit and raise competitivity.

France, the euro zone's second-biggest economy, exited recession with 0.5 percent growth in the second quarter, but is still limping.

The euro zone's biggest economy, Germany, on the other hand is blazing along, with data last week showing its trade surplus had hit a record high above six percent of GDP.

Barroso said the Commission was planning on Wednesday to "do a deep analysis" of imbalances in the German economy.

"It's true that the German surplus is above what is normal," he said.

Euro zone partners, the IMF and the United States worry that Germany's economy, driven by exports and relatively weak on domestic consumption, is proving a problem to euro zone recovery.

Barroso said: "There are some countries that have lost export markets, for instance France, Britain, Italy. We have to work together so we all become more competitive."

On the subject of his mandate, Barroso said he was ready to step down at the end of his second term in October 2014.

"Ten years is already a lot. But I want to work to the last minute for Europe," he said.