PARIS (Reuters) - France's unpopular government promised on Tuesday to give tax relief to low-income households as it sought to counter anger over rising taxes while pushing ahead with its drive to shrink the public deficit.
Less than two weeks before European Parliament elections, in which polls predict the ruling Socialists will come third behind the far-right and conservative parties, the government stressed its objective was to be fair.
A key measure will be to make sure that at least 650,000 households, due to pay income tax for the first time this year because the tax threshold has not been raised in line with inflation, will actually not have to pay it, Finance Minister Michel Sapin said.
"To pay new taxes when your revenues have not increased, that is not fair," Sapin told lawmakers.
"This will allow us to show to the French people that we can target efficiency and competitiveness while being fair."
The previous conservative administration had broken the link between inflation and income tax calculation, a move the Socialist government had maintained so far in its drive to cut the public deficit, angering many of its supporters.
The proposed tax relief will cost at least 500 million euros (406 million pounds), government officials said, adding that the exact amount would depend on the specifics of the measure but that it should be covered by other tax revenues and the fight against tax evasion.
The government is also considering ways to tweak local residency tax to relieve fiscal pressure on lower income households, junior budget minister Christian Eckert told reporters.
On the other hand, both Sapin and Prime Minister Manuel Valls stressed they would press ahead with their drive to rein in public spending.
"Cutting public spending and cutting taxes will always be at the heart of the measures we are proposing," Valls told lawmakers on Tuesday.
The government plans an extra 4 billion euros in savings to be included in the update to the 2014 budget law, which it is set to put to lawmakers on June 11. The aim is to meet its target of cutting the budget deficit to 3.8 percent of gross domestic product this year.
This would add to 15 billion euros in savings already planned for this year. President Francois Hollande's government then aims to squeeze 50 billion euros in savings out of the budget between 2015 and 2017.
Without going into details on how the effort would be spread out, Sapin told lawmakers that all branches of government, including the military, would have to make an effort.
The European Commission warned last week that France, the euro zone's second-largest economy, would miss its 2015 public deficit target unless it made rapid policy adjustments.
The government has made little headway in cutting unemployment, which stands at 10.2 percent, and the central bank forecast on Monday that the economy would grow by just 0.2 percent in the second quarter of 2014.
(Reporting by Jean-Baptiste Vey and Ingrid Melander; Editing by Mark Trevelyan)