Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

Royal decree on low-cut tops

Read more

DEBATE

Ukraine, The Escalation: No Stopping Putin? (part 2)

Read more

DEBATE

Ukraine, The Escalation: No Stopping Putin?

Read more

FOCUS

Bangladesh: Textile workers' lives still at risk?

Read more

TALKING EUROPE

José Bové, Candidate for the EU Commission presidency, Group of the Greens

Read more

WEB NEWS

NYPD's online campaign backfires

Read more

ENCORE!

Celebrating the Bard's birthday in Britain

Read more

THE INTERVIEW

Yuki Tatsumi, Senior Associate of the East Asia Program, Stimson Center

Read more

INSIDE THE AMERICAS

USA: Executions halted over drugs secrecy

Read more

  • Russia orders military drills as Ukraine moves on separatists

    Read more

  • Israel halts Middle East peace talks over Hamas deal

    Read more

  • Platini: PSG in danger over Financial Fair Play rules

    Read more

  • Ségolène Royal denies banning cleavage at French ministry

    Read more

  • Afghan guard kills US doctors in Kabul hospital attack

    Read more

  • Palestinian unity deal stirs anger in Israel

    Read more

  • Video: Mayor in east Ukraine ready ‘to turn Slaviansk into battlefield’

    Read more

  • US would defend Japan in islands dispute, Obama says

    Read more

  • New far-right mayor moves to quash Paris region mosque

    Read more

  • US soldiers arrive in Poland as Ukraine crisis continues

    Read more

  • Fatah, Hamas agree to form Palestinian unity government

    Read more

  • Millions of Syrians desperately need aid, says UN

    Read more

  • Muslims in CAR pray for an escape route

    Read more

  • Madrid beat Bayern 1-0 in first leg of Champions League semis

    Read more

  • Britain's ex-PM Blair warns against spread of radical Islam

    Read more

  • Turkish PM offers condolences to descendants of Armenians killed in 1915

    Read more

  • Gay marriage, one year on: ‘French civilisation did not crumble’

    Read more

  • Colombian president reinstates firebrand Bogota mayor

    Read more

  • NYPD public relations campaign on Twitter goes awry

    Read more

  • In pictures: Violent protests erupt in Rio

    Read more

France

French government unveils tax-and-slash 2013 budget

©

Video by Shirli SITBON , FRANCE 2

Latest update : 2012-09-28

The French government revealed a tough 2013 budget on Friday that seeks to tackle a €37 billion deficit with tax rises and deep spending cuts as unemployment tops three million and the economy teeters on the brink of recession.

France on Friday unveiled action to plug a 37-billion-euro hole in its public finances with the toughest package of tax rises and spending cuts the country has known in an economic downturn.

The 2013 budget adopted by President Francois Hollande's cabinet commits the ruling Socialists to an austerity programme at a time when the economy is teetering on the brink of recession.

Ministers defended measures that included a 75 percent top tax rate as unavoidable if France is to get its finances under control and meet European Union deficit targets deemed essential to avoid the collapse of the euro single currency.

But opposition critics derided a budget that will take billions out of the economy at a time when unemployment is close to record highs and contested government claims that the richest ten percent would bear the brunt of the pain.

"France is headed into the wall," warned Bruno Le Maire of the main opposition UMP party. Former budget minister Valerie Pecresse claimed: "This budget means 100 percent of French workers will be paying higher taxes."

The budget breakdown indicated that France needs to make 36.9 billion euros ($48 billion) in savings if it is to meet its target of reducing its budget deficit from an anticipated level of 4.5 percent of GDP this year to the EU ceiling of three percent in 2013.

"The three percent target is vital for the credibility of the country," Finance Minister Pierre Moscovici said. "We are committed to it and we will meet it."

Economists are sceptical about the government's ability to meet the deficit target and have warned that the dampening effect of cuts and tax hikes will make it difficult to attain the growth (0.8 percent for 2013, rising to 2.0 percent in 2014) on which the budget figures are based.

The French economy is currently flat-lining and latest data on jobs -- unemployment has topped three million, around ten percent of the workforce -- and consumer confidence point to that trend continuing into the winter.

"A 1.5 percent reduction of the deficit represents a considerable effort at the best of times. In a period of zero growth it would be exceptional," said Elie Cohen, director of research at the government-financed CNRS think-tank.

Eric Heyer, of the Economic Conjuncture Observatory, was even blunter: "It has never been done before."

Friday's budget was the first since Hollande was elected President in June on a pledge to put economic revival at the top of the national and European agendas.

As the reality of the grim economic situation he inherited has sunk in, Hollande has seen his approval ratings freefall and he is now on the verge of becoming the most unpopular French leader in living memory.

The beleaguered president, increasingly seen a hapless ditherer rather than the likeable regular guy he portrayed himself as during the campaign, was Friday at the Paris Motor Show, a visit that was unlikely to cheer him up much given the parlous state of the French car industry.

The total of 36.9 billion of savings includes 12.5 billion of cuts - 2.5 billion on health spending and 10 billion across other government departments.

A total of 10 billion will come from extra taxes on individuals and a further 10 billion from new taxes on businesses. These are in addition to 4.4 billion worth of new taxes announced in July.

Prime Minister Jean-Marc Ayrault claimed the cuts/tax hikes would ensure France could continue to finance its high level of debt at historically low interest rates, unlike Spain and Italy.

Data released on Friday revealed that France's national debt had risen to 91 percent of GDP, a level the premier described as unsustainable.

"We have to break with this spiral of ever increasing debt," Ayrault said. "If we don't say stop now, our taxpayers will just go on paying indefinitely purely to meet the interest payments."

The much-trumpeted 75 percent tax rate, which economists say will raise only marginal amounts, will apply to individuals with income above one million euros per year.

Ayrault has claimed that only one in ten French taxpayers will pay more as a result of Friday's changes and he said increased taxes on business will not affect small and medium-sized enterprises that are crucial for job creation in the first stages of an economic recovery.

"The effort we are demanding from our biggest companies is reasonable and fair," Ayrault said. "Not only have we spared small companies, we are going to help them create the jobs the country needs."

(AFP)

Date created : 2012-09-28

  • FRANCE

    Unemployment in France surpasses three million

    Read more

  • FRANCE

    Hollande unveils two-year plan, billions in new taxes

    Read more

  • FRANCE

    French lawmakers approve tax hike on rich

    Read more

Comments

COMMENT(S)