France has unveiled a huge deficit cutting package, which will see a €1bn cut in spending this year and €11bn in 2012.

The cuts will be made by raising taxes on the rich and closing some tax loopholes.

French Prime Minister Francois Fillon revised the government's growth forecast for 2011 downwards to 1.75% from 2%, but said the measures would trim next year's public deficit to 4.5% of GDP.

Mr Fillion unveiled an additional tax of 3% on annual income above €500,000 as part of the austerity package.

He said the tax would remain in place until France squeezes its budget deficit back under the EU's intended limit of 3% of GDP, which should occur in 2013.

French President Nicolas Sarkozy ordered the programme two weeks ago amid rumours, eventually denied, that ratings agencies were about to strip France of its AAA credit rating.

The additional measures have become even more necessary after data showed France's economic growth stalled in the second quarter, after expanding at a robust 0.9% in the first quarter.

France's debt level of around 85% is way above the EU's recommended maximum level of 60%.