Friday

28th Jul 2017

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 and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  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.

Greece looking at bond market return

Greece could issue 3-year bonds as early as this week, for the first time in three years, amid mixed signs from its creditors and rating agencies.

News in Brief

  1. EU citizens will need registration to enter UK in Brexit transition
  2. Italy weighs up sending navy into Libyan waters
  3. Swedish PM fights for survival amid IT scandal
  4. Poland's Kaczynski vows to continue judicial reform
  5. Werner Hoyer re-appointed as EU investment bank chief
  6. Spanish PM denies knowledge of party corruption
  7. France 'routinely' abuses migrants, says NGO
  8. Swedish government rocked by data scandal

Stakeholders' Highlights

  1. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  2. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  3. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  4. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  5. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  6. ACCAAnnounces Belt & Road Research at Shanghai Conference
  7. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  8. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  9. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  10. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  11. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  12. Counter BalanceOut for Summer Ep. 1: How the EIB Sweeps a Development Fiasco Under the Rug

Latest News

  1. UK and EU stuck on 'philosophy' of Brexit bill
  2. Europe needs a policy for peace in Nagorno-Karabakh
  3. Spain's PM appeals to court over Catalan independence
  4. Senate backs Russia sanctions, setting scene for EU clash
  5. France and Italy quarrel over shipyard and Libya
  6. Corbyn re-opens Labour's single market wound
  7. Visegrad lobby makes food quality an EU issue
  8. EU court could dismiss national borders in cyberspace