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New French government begins work on reform

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New French government begins work on reform

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French President Nicolas Sarkozy has presented his long-awaited proposals for economic reform. The “olde worlde” opulence of Paris’ Elysée Palace stood in stark contrast to Sarkozy’s definitive break with the past.
But balance is the key, he said, particularly regarding plans for a trial of the so-called social VAT: “We will reduce tax on salaries but put up Value Added Tax on goods. In one go we lessen the financial burden for employers and increase the burden of VAT. But overall, the buying power of the French consumer is not weakened because if goods are cheaper to produce then the lowered manufacturing prices compensate for the rise in VAT.”

Later in the day the new government held its first cabinet meeting. Reducing the impact of relaxing France’s 35-hour working week is one priority for ministers. Other measures presented by Finance Minister Christine Lagarde included packages designed to generate jobs and tax incentives for potential homebuyers.

An extraordinary session of parliament is due next week and the cabinet will work throughout most of the summer months on draft reform legislation.