Tue, Nov 08, 2011 page10

• France plans 100bn euro budget cuts

  AUSTERITY: To reach zero-deficit by 2016, the prime minister announced a series of tax hikes and budget cuts, including freezing the president’s and ministers’ salaries

  • AFP, PARIS
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  French Prime Minister Francois Fillon yesterday announced plans to save 100 billion euros (US$137.09 billion) to eliminate the nation’s budget deficit by 2016, including 500 million euros in extra state budget savings next year.

  “The time has come to adjust France’s efforts. With the president [Nicolas Sarkozy], we have only one goal: to protect the French people from the serious difficulties that many European countries are now facing,” Fillon said during a press conference.

  “I believe that our citizens are now aware of the risks to our livelihoods and futures caused by deficits and debt. Bankruptcy is no longer an abstract term. Our financial, economic and social sovereignty require prolonged collective efforts and even some sacrifices,” he said.

  

  French Prime Minister Francois Fillon gestures during a press conference yesterday at the Hotel Matignon in Paris.

  Photo: AFP

  Fillon announced a series of budget cuts and tax hikes aimed at keeping France’s finances on track and preserving its critically important triple-A credit rating.

  “To reach zero deficit by 2016, which is our objective, we must save a little more than 100 billion euros,” he said. “It is unthinkable to do this exclusively by raising taxes, as the opposition suggests. This would lead to the tripling of income taxes and the doubling of VAT [value-added tax].”

  The government’s flagship reform of raising the retirement age from 60 to 62 will be brought forward from 2018 to 2017, Fillon said.

  The VAT on many goods and services will be raised from 5.5 percent to 7 percent, except on essential goods such as food.

  Corporate taxes will also be temporarily raised by 5 percent on corporations with annual turnovers of more than 250 million euros, he said.

  “Our country must not be condemned to have its policies one day imposed by others. I want to tell the French people that the budgetary and fiscal efforts that we undertake today are a choice we make for the country and for generations to come,” Fillon said.

  The new measures are on top of August’s 12 billion euro deficit-cutting package that raised taxes on the rich and closed tax loopholes and after France revised its growth forecast for next year from 1.75 to 1 percent.

  Sarkozy had spent the weekend huddled with top ministers and advisers to devise the plan, amid rumors that France might be stripped of its triple-A rating.

  Ratings agency Moody’s warned last month that it may place a negative outlook on France’s “Aaa” credit rating within three months as the government’s financial strength had “weakened.”

  The new measures also come as center-right Sarkozy seeks to shore up his economic credentials six months ahead of a presidential election.

  Sarkozy is lagging in the polls behind Socialist challenger Francois Hollande, who has been mounting a strong challenge from the left.

  Fillon also said that the salaries of Sarkozy and his ministers would be frozen as part of austerity measures, calling on business leaders to do the same.

  “The salaries of members of the government and the president will be frozen until a return to a strict balancing of public finances,” Fillon said. “I call on political leaders and heads of big companies, particularly businesses in the CAC 40, to do exactly the same thing,” Fillon said, referring to the Paris stock exchange’s blue chip share index.

  “I call on everyone to show great responsibility,” Fillon said, calling pay rises for some bosses “frankly indecent.”
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