Friday

20th Apr 2018

France adopts 'combat budget' for 2013

France's Socialist government on Friday (28 September) unveiled €30bn worth tax hikes and spending cuts in a bid to bring the public deficit in line with EU rules next year.

Dubbed a "combat budget" by Prime Minister Jean-Marc Ayrault, the fiscal plan is based on sharp tax increases for the rich (75% on millionaires) and for companies expected to bring in €20bn.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • The Hollande government calls it a 'combat budget' for 2013 (Photo: Francois Hollande)

The budget is based on the assumption the economy will grow by 0.8 percent.

This may prove difficult, as France's growth was zero this year and the continuing eurozone crisis is worsening the prospects for next year.

Ayrault defended the growth forecast as "realistic" and promised that nine out of ten people with not have to pay extra taxes.

A further €10bn will be saved by curbing defence spending, prison buildings, transport infrastructure, cultural and ministerial budgets.

The budget is a key test of France's commitment to stick to the three-percent deficit target under EU rules after the election of Socialist President Francois Hollande, who had promised on his campaign trail to hire more teachers and lower the retirement age.

Ayrault insisted that bringing down the deficit from 4.5 percent of GDP this year to three percent next year was necessary in order for France to avoid the fate of its southern neighbours.

"If we abandon this goal, right away the rates will rise and then we will be in the same situation as Italy, in the same situation as Spain, and I do not want that," he said.

But economists at CitiGroup are sceptical that the calculations will hold and forecast a deficit of 3.7 percent next year.

Meanwhile, seen with EU eyes, the tax hikes and spending cuts are not the best Paris could have come up with.

"We want to see structural reforms, labour market reforms rather than tax increases and budget cuts. Structural reforms are the ones which unlock growth potential," one EU official told this website.

Paris has more breathing space than the likes of Spain, whose government has gone the extra mile on pension and labour market reforms in order to convince markets it does not need a full-blown bailout.

The deadline for submitting structural reforms plans for France is end of this year.

France is one of the 21 EU countries which are under increased supervision by the EU commission as they have overstepped the deficit threshold.

They need to submit their budgets for 2013 by 15 October, with the EU commission having the power to ask for adjustments and sanctions if its recommendations are not followed up. Austria, Bulgaria, Germany, Estonia, Finland and Sweden are the only countries currently outside this 'excessive deficit procedure'.

Thousands protest against French austerity budget

French President Francois Hollande faced his first serious public backlash after up to 50,000 lined the streets of Paris on Sunday in protest against his €37 billion austerity budget.

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

News in Brief

  1. Audit office: Brexit 'divorce' bill could be billions higher
  2. MEPs urge better protection for journalists
  3. Dieselgate: MEPs back greater role for EU in car approvals
  4. European parliament adopts new organic farming rules
  5. EU granted protection to half million people in 2017
  6. Report: Facebook to carve 1.5bn users out of EU privacy law
  7. Greek court ruling permits migrants to travel to mainland
  8. Commonwealth summit hopes for trade boost after Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  2. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  3. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  4. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  5. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  6. UNICEFCalls for the Protection of Children in the Gaza Strip
  7. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  8. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  9. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  10. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  11. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  12. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia

Latest News

  1. Macron and Merkel pledge euro reform
  2. Obscurity surrounds EU military fund's expert groups
  3. New EU party finance rules short circuit accountability
  4. Draghi to stay in secretive 'lobby' group
  5. Bulgaria offers lesson in tackling radical-right populists
  6. Getting secret EU trilogue documents: a case study
  7. Selmayr case scars Parliament and Commission
  8. Beyond macho: Turkish-EU ties