The new measures follow on from an earlier package of tax increases and spending cuts just three months ago, noted the New York Times.
They aim to save France €100 billion within five years, including €7 billion in 2012, reported Agence France Presse. The government's target is to eliminate France's budget deficit by 2016.
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"Prolonged collective efforts and even some sacrifices" are needed to deal with a harsh new economic reality in which "bankruptcy is no longer an abstract word," said Prime Minster François Fillon.
Notably, the government will raise the retirement age to 62 in 2017 instead of 2018. This reform risks being unpopular with unions, who reacted furiously last year when the government first confirmed plans to push back France's current retirement age of 60.
French consumers will also see value-added tax go up from 5.5% to 7% on "non-essential" items including public transport, books and restaurant meals.
Corporate taxes on companies with annual turnover of more than €250 million will be raised temporarily by 5%.
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Fillon also pledged that the salaries of President Nicolas Sarkozy and other ministers would be frozen "until a return to a strict balancing of public finances," and called on big businesses to follow suit.
He described the new measures as the most stringent introduced since 1945, reported Euronews, but described them as "a choice we make for the country and for generations to come."
For Sarkozy's government, they are also a pre-election gamble, says Reuters:
Preserving France's coveted AAA credit rating through deficit reduction plans has been a key goal of Sarkozy, who in recent months has cast himself as a responsible steward amid the turmoil of the seemingly unending euro zone crisis.
The cuts come at a politically sensitive moment for a leader whose popularity ratings are low six months from a presidential election in which he is widely expected to seek a second term.