France's Prime Minister Manuel Valls. Photo: AFP
With tepid investment by companies seen as a key restraint to growth, Valls announced the exceptional tax break for industrial investments made over the next 12 months.
What Valls heralded as an "unprecedented measure" will allow companies to deduct 140 percent of the value of their industrial investments against their taxable benefits over five years, as well as reduce their business taxes.
"To accelerate the economic recovery we need to remove all the obstacles, use all the tools, and investment is a key tool," Valls told journalists.
After coming in at a meek 0.4 percent, Finance Minister Michel Sapin said "for growth to become strong and resilient we've been missing … the investment engine."
The investment tax breaks are in addition to the €40 billion that the French government plans to give companies in tax breaks through 2017 with its so-called Responsibility Pact.
As the number of unemployed remains stuck near a record of just under 3.5 million, Valls criticised companies for not holding up their end of the bargain in terms of maintaining and creating jobs.
Valls said the government would also seek to boost investment with €3.2 billion going to work on motorways.
The state-held investment bank is also to step up lending to companies by €2.0 billion.
And households will receive tax breaks for home insulation.
The state will also help local councils, which cut back dramatically on investment when the central government cut back funding, with advance tax refunds.
Local councils, which account for 70 percent of public investment, slashed their investment by €5.3 billion last year.
Officials from the prime minister's office estimated that the measures could reduce government revenue by some €500 million this year.