Dear Commons Community,
Hoping to avoid the social unrest that has occurred in Spain and Greece, France will implement a series of new tax policies to increase its revenues. As reported by the Reuters News Service:
“Socialist President Francois Hollande unveiled higher levies on business and a 75-percent tax for the super-rich on Friday in a 2013 budget aimed at showing France has the fiscal rigour to remain at the core of the euro zone.
The package aims to recoup 30 billion euros ($39 billion) for the public purse with a goal of narrowing the deficit to 3.0 percent of national output next year from 4.5 percent this year – France’s toughest belt-tightening in 30 years.
But the budget dismayed business and pro-reform lobbyists by hiking taxes and holding France’s high public spending at the same level rather than cutting it as Spain, Greece and Italy have done to chip away at their debt mountains.
With record unemployment and a barrage of data pointing to economic stagnation, there were also fears the deficit target will slip as France falls short of the modest 0.8 percent economic growth rate on which it is banking for next year.
“We do not want France to be delivered shackled to the markets as has happened to other neighbouring countries that have succumbed to the temptation of letting their budgets get out control,” Finance Minister Pierre Moscovici said of France’s determination to stick to its deficit goal.
Prime Minister Jean-Marc Ayrault dismissed fears about possible slippage, insisting the 0.8 percent growth target for next year was “realistic and ambitious”.
Hollande’s aim is to achieve the savings without hitting the purchasing power of low-income families. But France’s main employers’ group said the measures would backfire by weakening the competitiveness of French industry.”
It will be interesting to see how this plays out and whether it becomes a model for other countries including the U.S.A. that are struggling with burgeoning debt.