Sunday

22nd Jan 2017

French tax hikes would 'destroy' growth, EU says

New measures to reduce France's budget deficit must come from public spending cuts, the EU's economic affairs commissioner said Sunday (25 August), warning that any new taxes would “destroy growth and handicap the creation of jobs."

In an interview with the French weekly Le Journal du Dimanche, Olli Rehn, commissioner for economic and monetary affairs, said that tax levels in France had reached a "fateful point". “Budgetary discipline must come from a reduction in public spending and not from new taxes,” he added.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Rehn's remarks come as Francois Hollande's socialist government race to finalise reforms of the country's budgetary plans, including reforms to the French healthcare and pension schemes. Under the EU's recently revised rules on economic governance, governments must submit their budget proposals to the EU executive for an opinion prior to their adoption, although they are not legally required to apply the Commission's fiscal recommendations into law.

That said, Rehn's comments are unlikely to be well received by a government which has repeatedly voiced its irritation with the Commission's criticism. "The Commission cannot dictate to us what we have to do. It can simply say that France must balance its public accounts," said Hollande in May.

The French economy recorded a better than expected 0.5 percent growth rate in the second quarter of 2013, which will dampen concerns that the country's economy will remain stagnant in 2013.

In the first 14 months of his Presidency, Hollande has come under increasing pressure from Brussels to bring down France's budget deficit and liberalise its labour market. In May, Paris was given a two year extension by the European Commission, until the end of 2014, to bring its deficit below the EU-required 3 percent of GDP. Rehn warned Hollande that it was "crucial that it (France) uses this extra time to overcome problems with its competitiveness".

Hollande is also under pressure from his governing socialist party to increase employment and maintain public spending levels. In July, the country's jobless total reached 3.279 million, an increase of 14,900 people from May, dealing a blow to Hollande's pledge to reduce unemployment by the year's end.

Unlike the austerity measures in most other European countries, Hollande's government has put the emphasis on higher taxes rather than spending cuts as it seeks to balance the country's books. The French tax burden currently stands at around 48.5 per cent of GDP

On Sunday prime minister Jean-Marc Ayrault reiterated plans to press ahead with a “carbon” or “green” tax to try to push the French economy away from dependence on fossil fuels.

Trump pledges US-first foreign policy

Economic protectionism and war on Islamist terrorism will form the heart of US foreign policy, Trump has said. He did not rubbish Nato, but indicated interest in a new Russia alliance.

GMO opt-out plan remains in waiting room

The commission wants to give the power to member states to reject EU-approved genetically modified organisms, but the Maltese presidency is unlikely to approach the issue any time soon.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey