Saturday

25th Feb 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.

France plans budget cuts in 2014

France is to cut its budget next year for the first time in over five decades in a bid to meet an EU deadline on deficit reduction.

Opinion

The erosion of southern Europe

“Europe is back!” is the new, though cautious market mantra. Certainly, Europe will ultimately recover, but it will be a different Europe. Current hopes are inflated, as evidenced by the erosion of southern Europe.

Column / Health Matters

The yin and yang of traditional Chinese medicine

Can traditional medicine help the modern European patient? Malta has signed an agreement with China that would increase the provision of traditional Chinese medicine to its citizens.

Column / Brexit Briefing

Searching for a voice and a standard bearer

As Britons come to terms with the reality of Brexit many Remainers are now listless, looking for someone to present a viable alternative to Theresa May's dominance

News in Brief

  1. Spanish court jails former IMF chief Rato
  2. Macron proposes Nordic-style economic model for France
  3. Germany posts record high budget surplus
  4. Labour ousts Ukip in Brexit homeland
  5. Dutch lower house approves EU-Ukraine treaty
  6. WTO says Russian pork ban was illegal
  7. Belgian nuclear plant made 'significant progress' on safety
  8. Report: Commission gauging EU support for Poland sanctions

Stakeholders' Highlights

  1. EURORDISJoin Rare Disease Day and Help Advocate for More Research on Rare Diseases
  2. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  3. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  4. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  5. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  6. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  7. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  8. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  9. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  10. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  11. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  12. Centre Maurits CoppietersMinorities and Migrations