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France plans to cut petrol prices

France is to cut petrol taxes to ease the pressure of the rising cost of living.

Prime minister Jean-Marc Ayrault announced the move in an attempt to rebuild public confidence as Paris faces the challenge of reinvigorating the economy despite tight state finances.

Unveiling the tax cut after president Francois Hollande's first cabinet meeting following France's traditional August holiday break, Mr Ayrault sought to convey can-do optimism amid concerns that the troubles with unemployment, state debt and weak growth that are affecting Spain, Italy and Greece could soon ensnare France.

"This is a sign of determination, but of confidence," he said, referring to a string of economic measures. "It's especially to tell the French people: 'Even if we live in an uncertain world, even if Europe faces threats, even if the world scene is fragile, France has abilities - we the French people have abilities - and we are going to succeed.'"

France is the second-largest economy among the 17 countries that use the euro. However its economy has not grown in the past six months and it has a 10% unemployment rate. Meanwhile Mr Hollande wants to bulk up the public sector - such as by hiring 60,000 more teachers over his five-year term.

Mr Ayrault said that parliament would convene in a special session to take up legislation to create 150,000 jobs in vital sectors and build 150,000 state homes. The government also gave its final approval to a largely symbolic reduction in the salaries of both the president and prime minister by 30% - an emblem of their message of social justice, that austerity isn't just about squeezing ordinary workers.

In the meantime, the government wants to help soften the squeeze of rising petrol prices. Petrol currently runs more than 1.70 euros (£1.34) a litre in Paris.

Mr Ayrault did not go into details about the "unilateral" reduction in gasoline taxes, which he called small and temporary, or the potential impact on the budget.

"The government will do its job - that's to say taking a step that will lower, notably on the tax level, the cost of fuel," he said. The measure "will allow us to ask (oil) producers and distributors to do their share too."

Finance Minister Pierre Moscovici said details of the tax cut would come next week, after he receives a government report on the matter and holds talks with consumer and industry groups.

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