Paris: France was set to announce €8 billion or more in cuts and tax hikes on Monday, imposing more pain on voters to protect its credit rating and rein in its deficit in a make-or-break gamble for President Nicolas Sarkozy six months from an election.

Sarkozy’s centre-right government says extra savings are urgently needed to keep France’s finances from going off the rails, since it cut its growth forecast for next year to 1% from 1.75% last week.

France’s President Nicolas Sarkozy . AP

Like other European countries, France is struggling to keep its public finances under control and contain its debt without triggering a sharp drop in consumer spending, a cornerstone of the French economy, or sparking protests of the scale seen in other countries such as Greece.

Ratings agencies have been hinting they could cut France’s prized top credit rating because of its slowing growth and its potential liability for the cost of bailouts in the European debt crisis.

Without ever mentioning the word “austerity," ministers from Sarkozy’s centre-right government spent the weekend defending the need for fiscal vigilance amid fears of mounting debts in Western states.

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

Ministers have given no concrete details on where the cuts would come from, but said they would be “equitable".

Finance minister Francois Baroin told RTL radio on Sunday the measures would be balanced evenly between spending cuts and tax rises.

Newspapers reported that the transition to France’s higher retirement age of 62 would now take place in 2016 or 2017, rather than 2018 and Le Figaro said on Monday automatic rises in welfare benefits could be hit too in a budget adjustment that might even hit €10 billion in all.

Securing a rise in the retirement age to 62 from 60 was a key political victory last year -- but a highly unpopular move -- for Sarkozy, who said it was necessary to keep France’s ballooning pension deficit in check.

Speeding it up would mean saving billions in coming years by delaying payments to retirees.

Newspapers also reported the government could also raise France’s value added tax (VAT) rate in certain sectors from 5.5 % to 7.0%, reversing an earlier policy to lower it.

The government might also slap a corporate tax on businesses with annual revenues over €500 million , the paper said.

Baroin denied speculation that French workers would be asked for an additional “day of solidarity" in which salaried workers work for free one day, their pay going to the state.

France is trying to reduce its budget gap from 5.7% of GDP this year to 4.5 % next year. It hopes to reach an EU-mandated limit of 3% of GDP by 2013.

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.

Socialist presidential challenger Francois Hollande said in an interview in Liberation newspaper that the orders from Sarkozy to find some €6-8 billion in savings might even be insufficient and the newly reduced growth forecasts still overly optimistic.

“It mustn’t be forgotten that €75 billion in tax revenues evaporated during Sarkozy’s five-year term through tax breaks for France’s largest companies and the best-off households," he said.