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French Central Bank Chief Urges Spending Cuts

Christian Noyer, governor of the Bank of France and a member of the European Central Bank governing council.
Jin Lee | Bloomberg | Getty Images
Christian Noyer, governor of the Bank of France and a member of the European Central Bank governing council.

The French central bank chief urged President Hollande and his government to stop hiking taxes and to cut government spending. His comments on Tuesday echoed ratings agency Standard & Poor's calls for France to make budget cuts to prevent a downgrade.

Christian Noyer, Governor of the Bank of France, told CNBC on Tuesday that it was clearly time to look at spending cuts rather than taxes to rebalance France's public finances.

(Read More: S&P: France Must Deliver Promised Budget Cuts)

"I think taxes have been increased overall quite significantly and clearly the effort now for continuation of rebalancing the public finances should be on the expenditure side," said Noyer.

"We encourage the government to concentrate their efforts on the expenditure side. Expenditure everywhere, in the local government finance, the government budget and social security also."

(Read More: French Charm Offensive: Too Little, Too Late?)

Ratings agency S&P, which stripped France of its coveted AAA rating in January 2012, told France on Tuesday it needed to deliver promised budget cuts.

If "economic growth prospects deteriorate further or the economy is threatened by continuing rigidities in the labor market and services sector", France could risk another rating cut, analyst Marko Mrsnik said.

Noyer, who sits on the European Central Bank's governing council, which makes monetary policy decisions, also said the German economic model had been an "inspiration" when looking at how to improve competitiveness.

(Read More: 'Time is Running Out,' Asset Manager Tells Hollande)

"The choice has been to look back at what Germany has done over the last decade. What they have done is indirectly reduce social levies imposed on wages and replace that through public financing by a small increase in [value added taxes] and indirect taxes. This is certainly a way to lighten the cost of labour and a way to improve competiveness," said Noyer.

Noyer's comments come as French consumer spending hit its lowest level since July 2008 according to French statistics agency, Insee.

The survey also showed that French households think the unemployment rate, now at 11 percent, will continue to rise.

By CNBC's Jenny Cosgrave; Follow her on Twitter @jenny_cosgrave.

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