President Francois Hollande will commit to the sharpest cut in France's public deficit in three decades on Friday.
The budget could make or break its credibility with euro zone allies and financial markets
The aim is to reduce the deficit from 4.5% of gross domestic product this year to 3% next - a goal which economists said could still be missed if France fails to match its already modest 2013 economic growth target of 0.8%.
The French budget comes a day after Spain unveils its 2013 budget with new austerity measures which on Tuesday triggered clashes between protesters and police in Madrid, highlighting the potential for social unrest across in Europe as governments seek to tackle years of overspending.
Hollande's room for manoeuvre is tight with Europe's second largest economy already close to recession.
Elected four months ago on a platform of growth and jobs, he is promising to reconcile those goals with an effort to win €30 billion for the budget on top of €7 billion worth of measures already passed through this year.
Two-thirds of the extra cash will come from higher taxes on business and individuals, with the remainder to be recouped via a simple freeze at nominal rates of most France's heavy government spend rather than actual cuts to it.
Tax hikes are due to include a temporary 75% levy on earnings over one million euros which, while raising fears of an exodus of local captains of industry, is likely only to reap around €200. A new rate of 45% on incomes over 150,000 euros will bring in 300 million euros.
Officials say most existing income tax brackets will not rise with inflation as usual, leading to an extra 1.5 billion euros in revenues. A number of longstanding tax breaks will either be scrapped or reduced.
Business will face measures including a reduction in the rate of tax deductibility of loan interest, a move which by itself will swell state finances by around four billion euros.
"We view this budget, and the way it is being prepared, with consternation," Laurence Parisot, head of the employers group Medef said of fears it will damage the competitiveness of French businesses already struggling with high labour charges.
While critics say that raising the tax burden only stores up trouble for further down the line, the initial focus will be on whether France can actually achieve the 3% target.
So far, markets have given France the benefit of the doubt and are currently buying its medium- and long-term debt an average yield of 1.98%, a record low which this year has already led to savings of €1.4 billion on debt repayments.
The risk of France missing the 3% deficit target is particularly acute if the economy gets worse next year. Each 0.1 percentage point by which it under-performs its 0.8% growth forecast implies an extra €1 billion in savings to maintain the deficit target.
If economic growth falls short of target, some argue it may be better for France to slip slightly on the three percent deficit target rather than to tighten the fiscal screw further and tip into recession.
"A 3.5% deficit would continue to reassure markets," said economist Ludovic Subran at credit insurer Euler Hermes.
