French President Emmanuel Macron’s government is set to unveil its first annual budget today, balancing tricky priorities as it seeks to cut taxes while also slashing the deficit.
Macron has pledged to find 16 billion euros (US$18.9 billion) of savings next year, seeing cutting the deficit as key to boosting France’s credibility in Europe as he eyes a shake-up of the EU.
France is one of the few remaining nations in the EU’s bad books for spending beyond the bloc’s deficit limit of 3 percent of GDP.
Macron wants the deficit to come in lower than that next year for the first time in a decade.
However, the former investment banker is also eyeing tax cuts for companies and families worth a total 10 billion euros, leaving his government with less cash to make up the balance.
“Its ambitions are three-fold: considerable tax cuts, higher spending in certain sectors and bringing down the deficit,” said Alain Trannoy, head of research at the School for Advanced Studies in the Social Sciences.
“That inevitably creates a tension,” Trannoy said.
French Prime Minister Edouard Philippe has warned there will be tough choices, saying last month that he was “not here to be nice.”
An interim budget for this year finalized in July included cuts to housing subsidies and defense spending, which sparked a backlash from left-wingers in parliament and the head of the armed forces.
Social security is set to see a 5.5 billion euro cut next year, according to a source close to budget preparations, while nearly 1,600 civil service jobs are to be axed.
In better news for many families, about 80 percent will see their household tax scrapped in a move the government hopes will increase the spending power of consumers.
Macron came to power in May promising to make France a more attractive destination for investment, starting his presidency by pushing through reforms to the nation’s famously complex labor laws.
“France suffers from two ills: a lack of attractiveness and a lack of competitiveness,” said Geoffroy Roux de Bezieux, vice president of business lobby Mouvement des Entreprises de France, or MEDEF.
The budget “essentially responds to the first problem,” he said.
Macron’s socialist predecessor, Francois Hollande, had already pledged to bring down corporate tax from the current 33.3 percent to 28 percent by 2020.
The president plans to cut this again to 25 percent by 2022, as he seeks to cast off France’s reputation for being a difficult place to do business.
Despite the tax cuts, the budgets of several ministries are set to go up next year — notably that of defense, after the armed forces chief quit in a blazing row this summer over Macron’s plans to slash military spending.
People with diesel cars may face a 10 percent tax rise to US$0.09 a liter as his government seeks a greener economy.
The environment was at the centre of a 57 billion euro investment fund unveiled on Monday, which includes cash incentives for drivers to trade in heavily polluting cars.
France is forecast to see economic growth of 1.7 percent this year, but Macron has vowed to make a priority of lowering unemployment stuck at about 9.5 percent about twice that of Britain or Germany.
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