French budget to hit the rich

Now Reading:

French budget to hit the rich

Text size Aa Aa

The rich and big companies are the targets of France’s new Socialist government as it announced tax rises of 7.2 billion euros.

A one-off levy on wealthy households is supposed to bring in 3.2 billion while large banks and energy firms will contribute just over one billion.

“We are in an extremely difficult economic and financial situation,” Finance Minister Pierre Moscovici told a news conference. “In 2012 and 2013, the effort will be particularly large. The wealthiest households and big companies will have to contribute.”

Looking to plug a revenue shortfall this year caused by feeble economic growth, President Francois Hollande and his cabinet are following through on election promises to hit the rich – with things like taxes on stock options and dividends – rather than austerity measures.

Despite a stagnant economy and rising debt, the plan is to cut the budget deficit from 5.2 percent of GDP last year to 4.5 percent this year and down to the EU imposed limit of 3.0 percent in 2013.

The new budget should easily pass through parliament where Hollande’s party has a majority, but it will be more difficult to get France’s unions to agree to a cap on pay rises and promotions as part of future spending cuts.

The budget was announced two days after a grim assessment of public finance by the state auditor, which warned that 6-10 billion euros of deficit cuts were needed in 2012 and a hefty 33 billion in 2013 for France to avoid a surge in public debt dragging it into the centre of the euro crisis.