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French homes to feel pinch of austerity in 2012

Text by Joseph BAMAT

Latest update : 2012-01-02

With wages languishing and consumer prices once again on the rise, 2012 could prove to be a particularly tough year for French households.

Austerity measures adopted by the French Parliament in November 2011 are going into effect in January, raising the price of many consumer goods and services across the country. An increase in the sales tax, or VAT, as well as a hike in transport and gas prices could make 2012 a difficult year for French households.

As part of a deficit-reducing plan championed by French Prime Minister Francois Fillon last year, VAT will go from 5.5% to 7% for many consumer goods this week, with some notable exceptions. The tax rise was adopted by the lower-house National Assembly, controlled by President Nicolas Sarkozy’s conservative UMP party.

The measure, part of the 2012 state budget, was passed in a 315-198 vote on November 16, with MPs of the main opposition Socialist Party voting in mass against it.

French people will pay more for some food items, including sodas, as well as books and museum visits. Bills for restaurants, hotels and in-house services, such as house cleaning and repairs, will also be more expensive in 2012.

Basic food items, such as water, non-alcoholic beverages, fruits and vegetables will continue to be taxed at 5.5% in France. Hard alcohol and other food products that are not considered basic necessities will be taxed at 7% in an effort to plug the country's budget deficit.

Consumer advocates said the tax hikes were not consistent with buyer’s real needs, pointing to the rise in the price of bakery sandwiches but not of pastries. Caviar, considered a luxury good, will continue to be taxed at 19%, but chocolates and duck liver pâté are being spared the higher levy and will retain a 5.5% sales tax.

“We agree that the consumer should participate in the reduction of the state’s deficits, but we denounce the absence of logic in the tax rises, especially when consumers are the ones most affected by the government’s measures,” Olivier Androt, a food specialist for the Federal Union of Consumers, told FRANCE 24.

Consumer groups also decried a general rise in the price of transportation in 2012, which they said would place a heavy burden on ordinary people. The cost of Paris-region commuter trains and buses saw a rise of 1.5% even before January, and the national railway said it would increase the price of high-speed and interregional rail by 3.2% starting on January 3.

Gas on the rise

Apart from more expensive food and transport, the French were also worried by the prospect of heavier gas bills. Households as well as businesses will pay an average of 4.4% more for gas this winter. The cost of electricity will remain the same, the government said.

In an effort to protect France’s poorest, the government said the gas hike would be accompanied by a 10% reduction in gas for individuals earning less than 7,771 euros per year and couples who earned less than 11,657 euros per year.

Addressing French citizens in a recorded television message on New Year’s eve, President Sarkozy said there would be no new austerity measures in 2012 and that his government’s current cutbacks were necessary.

Sarkozy, who is widely expected to run for re-election in April, is facing 12-year high unemployment in France that reached 2.8 million people in November.

The CGT, France’s largest union, has called for a nationwide strike on January 18 in protest at the current austerity measures.

Date created : 2012-01-02


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