‘France is on the ropes’: PM announces economic clean-up plans

One day after French president Emmanuel Macron’s philosophical discourse on French democracy in the royal palace at Versailles, prime minister Édouard Philippe on Tuesday delivered a no-nonsense, brass tacks general policy speech on his plan to clean up France’s ailing finances.

“There is a French addiction to public expenditure,” Philippe said. “Like all addictions, it in no way resolves the problems it was meant to solve. Like all addictions, it will take will and courage to come clean.”

The state auditor last week reported that the previous Hollande administration left a bill for €8 billion in unbudgeted expenditure. “Our debt has reached the unbearable level of €2,147 billion,” Philippe said. Debt service costs €42 billion annually, “more than the defence budget and five times the budget of the justice ministry”.

Philippe nonetheless promised that France would bring deficit spending below 3 per cent of GDP, as required by the EU, this year.

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For every €100 that Germany collects in taxes, it spends €98, Philippe said. In contrast, for every €117 France collects, it spends €125. “How could this situation could continue?” he asked.

To reach the 3 per cent threshold, the government will postpone until at least 2019 three of Macron’s campaign promises: ending the annual “habitation charge” for 80 per cent of taxpayers; the conversion of the CICE business tax credit into reduced social charges, and exempting stock market investments from the wealth tax.

Philippe said he would reduce public spending by three points over five years, and lower taxes by one point over the same period.

Public sector payroll

Taxpayers "will not be the adjustment variable in the budget", the prime minister said. "On the contrary, obligatory withholdings will decrease €20 billion between now and 2022 . . . France cannot continue to be the champion of public expenditure and the champion of taxation."

Philippe said he would freeze the public sector payroll, which accounts for a quarter of public spending. “No ministry, no operator, no tax niche will be sanctuarised. We will hunt down inefficient spending and rethink public policies that weigh us down without giving results.”

France subsidises housing more than any EU country, yet the French still encounter difficult in finding lodging, the prime minister said. The same was true of professional training for the jobless.

“France is on the ropes. We can’t duck it. I’m calling for effort and courage,” Philippe said. He promised the social security budget will be balanced in 2020.

Far-left deputies from France Unbowed and the Communist Party placed the red-coloured bound volume of the labour code on the shelves in front of their seats in a sign of protest when Philippe spoke of reforming the labour code.

The prime minister portrayed labour reform, to be presented this week, as a “social emergency” and a question of freedom. “We know that everyone wants more freedom to change profession, to create, to undertake, to reconcile professional and private life,” he said. “We must renew our social model so that it creates truly efficient protection, rather than paper guarantees. We must accompany those who take risks; not those who are ensconced.”

Despite the seriousness of the issues, the session in the National Assembly was mostly good-natured. The 577 deputies, 430 of who were not in the previous assembly, primped and smiled for a wide-angle photograph. They applauded Philippe often. "I see a renewed, feminised assembly that resembles France," he said.

Other announcements included 15,000 new places in prison, obligatory vaccinations for children, €10 for a pack of cigarettes, and free eyeglasses and hearing aids.