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Francois Hollande On French Economy: 'I Am In A Battle And Will Not Look Back'

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* Hollande says labour market reform to be in place by year-end

* Lowers 2013 budget growth forecast to 0.8 pct from 1.2 pct

* Tax hikes worth 20 bln euros to hit companies, wealthy households

By John Irish

PARIS, Sept 9 (Reuters) - French President Francois Hollande on Sunday promised to turn the country's stagnant economy round by 2014 and set himself a year-end deadline to ready labour market reform.

The pledge, made to the nation in a prime time television interview, comes four months into his presidency as tumbling ratings and talk of inertia have forced him to become more proactive on the economy.

"I am in a battle and will not look back," he said. "I am setting up a calendar ... two years to create a policy for work and competitiveness. I am accelerating," he said.

Hollande's speech was clearly aimed at turning around perceptions that he is not moving fast enough.

"I know where I am going. I will assume all the responsibility and I will talk regularly to the French people," he said.

Hollande, whose immediate challenge will be to find 30 billion euros ($38.40 billion) in savings in the 2013 budget, said the government would lower its growth forecast to 0.8 percent from 1.2 percent for next year.

"Growth has been shrinking for several months. We will be just over zero percent in 2012 ... so I have asked the government to base the predictions on realistic forecasts. It will be inferior to 1 percent, probably 0.8 percent," he said.

The budget is expected to be the most austere in 30 years as France tries to hit a deficit target of 3 percent of gross domestic product next year or risk losing investors' trust.

It will be presented at a Sept. 28 Cabinet meeting, which has been pushed back by two days to allow for Hollande's trip to the United Nations' General Assembly in New York.


Hollande said last week that by holding state spending steady next year in nominal terms, excluding debt servicing and pension payments, his government would save 10 billion euros in inflation-adjusted terms.

However, that would amount to just one third of the more than 30 billion euros in savings which Hollande says are needed to hit next year's deficit target and stay on course to balance the budget by the end of his five-year mandate.

With his government refusing to cut staffing levels, the bulk of the adjustment will have to come from tax rises.

He said the remaining 20 billion euros would come from tax hikes on companies and wealthier households.

"It's a considerable effort, it's never been done in the history of the Vth Republic, but it's my responsibility," he said.

Having won a May election with 51.6 percent of the vote, Hollande's ratings have slid below 50 percent in less than half the time it took Sarkozy to fall from favour.

A BVA poll published for Le Parisien on Sunday suggested that almost 60 percent of French people are "relatively unhappy" with the president's start compared with 34 percent on May 31. A second survey from pollsters Opinionway showed his popularity rating falling 14 points to 46 percent since June.

Hollande said he expected unemployment, which is at 13 year highs, to begin to fall within a year as his proposals to create 80,000 subsidised jobs and to hire 60,000 people in the education sector as well as a so-called "generation contract" to encourage companies to hire young workers kicks in.

The new Socialist head of state has tried to break from his predecessor Nicholas Sarkozy's pushy manner, promising to consult with social partners but gave unions until the end of the year to reach a "historic compromise" on labour reform or said the government would act unilaterally.

"He seemed to be a totally helpless president, expressing hopes for growth, some minor measures that practically came from the (President Francois) Mitterrand era," Marine Le Pen, president of the far-right National Front, said. "It was almost prehistoric, but what he did confirm was that he would punch a hole of 33 billion euros in the middle classes."

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