PARIS - French households and businesses can expect lower taxes in two years’ time, but tough choices to fix an indebted welfare system are still needed, Budget Minister Jerome Cahuzac said on Sunday.
The Socialist government unveiled a tough 2013 budget on Friday that slaps higher levies on business and a 75-percent tax on the super-rich but does not reduce public spending, to the dismay of business and most economists. Cahuzac, the driving force behind a budget that seeks to recoup an extra 30 billion euros for the state, said taxes would not rise in 2014 and may start to come down the following year if economic conditions allow.
“We face two difficult years, two indisputably very difficult years,” Cahuzac said on Europe 1 radio. “But there will be no further fiscal effort after that ... from 2015 we expect to reduce obligatory levies.” Critics say the budget should have achieved more of the savings by chopping away at France’s bulky welfare state and public spending, and many economists say official growth forecasts look optimistic.
Cahuzac said the government remained committed to a target of 0.8 percent economic growth next year, as well as bringing the deficit down to three percent of gross domestic product in 2013 and balancing the budget in 2017.
However, he warned that the economy would not become more competitive until the French made tough choices about how their welfare system is financed, with sacrifices required to bring the country up to speed with EU powerhouse Germany. President Francois Hollande is expected to present a broad competitiveness package early next year following extensive talks between unions and employer groups.
The package is likely to include plans to smooth labour relations, help firms cope with downturns and cut unit labour costs for employers. But the government has yet to flag any cuts to health, unemployment or social benefits.
“We’re very focused on how to pay, but the real question is how much we are ready to pay,” said Cahuzac. “How much are we willing to pay, collectively, to finance this country’s exceptional social protection net?”
“If some people really want France to align itself on Germany, they must say so out loud, with everything that implies,” he added.
A barrage of disappointing data has darkened the outlook for France, with growth stalled, unemployment above a symbolic 3 million mark and the economy expected to shrink in the third quarter.
Asked if France might ask the European Commission for one more year to meet its deficit target, Cahuzac said: “Unilaterally, that’s excluded. France has given its word and intends to respect it.”
However, if Spain or Italy asked the bloc’s executive arm for more time, “France will not be opposed,” he added.