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Sarkozy hikes taxes in pre-election gamble

AFP · 30 Jan 2012, 07:05

Published: 30 Jan 2012 07:05 GMT+01:00

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President Nicolas Sarkozy went on primetime TV Sunday to unveil plans for new taxes he hopes will fix France's ailing economy and boost his credibility ahead of polls he is tipped to lose to a Socialist.


The right-winger has not confirmed he will stand for re-election, but he gave his strongest hint yet he will be a candidate in the election that opinion polls predict will be won by François Hollande.

"I have a rendezvous with the French. I will not shy away from it," Sarkozy told journalists who pressed him on whether he would stand in the election, the first round of which will be held in April.

In an hour-long broadcast carried by six channels, Sarkozy unveiled plans for a hike in the sales tax to 21.2 percent and a 0.1 percent "Robin Hood" financial transaction tax.

He also promised a raft of measures on reducing work time to cut salaries to save jobs, increasing the number of young people taken on as apprentices and creating a new bank to invest in French industry.

Sarkozy's ministers say he believes the reforms will show that, unlike Hollande, he is courageous enough to do the dirty work to save France from economic meltdown.

But the president, who staked his reputation on boosting the French economy, faces an uphill task. He is behind in the polls, unemployment stands at nearly three million, a 12-year high, and public debt is at record levels.

Sarkozy's television appearance came a week after Hollande launched his own campaign with a blistering attack on the faceless" world of finance.

He later outlined his plans to reverse Sarkozy's legacy, promising €20 billion ($26 billion) in new spending by 2017, the creation of 60,000 new teaching jobs and 150,000 state-subsidised new jobs for young workers.

An opinion poll this week said Hollande would take 56 percent of the votes in the second round of the election in May, with Sarkozy scoring 44 percent.

Sarkozy's planned sales tax hike of 1.6 percentage points -- to 21.2 percent -- aims to shift the burden of paying for social security from employers to consumers, help create jobs and make French firms more competitive.

But some economists warn that the reform could hit domestic consumer demand, the main motor of the flat-lining French economy. Members of Sarkozy's own UMP party also fear it could lose him votes.

Sarkozy said the new 0.1 percent tax on financial transactions would come into effect from August in France. He said it would enable French companies to keep jobs at home instead of out-sourcing them abroad.

He said he hoped to "create a shock" with the controversial tax and inspire other European countries to follow his lead, despite vocal opposition from some EU leaders.

Sarkozy used Sunday's interview to argue that measures taken to end the financial crisis threatening Europe and the rest of world had started taking effect.

"Europe is no longer on the edge of the abyss," he said. "The elements of a stabilisation of the financial situation in the world and in Europe are in place."

His comments came as the sovereign debt crisis continues to dominate political debate in Europe and against a backdrop of frantic negotiations on a write-down deal between Greece and its creditors.

Sarkozy also said that France's public deficit would be better than predicted for 2011, at 5.3 or 5.4 percent of gross domestic product instead of the 5.7 percent forecast.

The interview came two weeks after France suffered the humiliation of losing its top triple-A credit rating with Standard and Poor's.

The president got unexpected support on Saturday when centre-right German Chancellor Angela Merkel's party said she would join Sarkozy at campaign rallies in the coming weeks to boost his re-election chances.

Merkel may be worried that a Socialist victory in France could derail the German-led austerity drive -- grudgingly backed by Sarkozy -- that aims to resolve the European debt crisis.


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Your comments about this article

2012-02-03 10:10:26 by muggals
Sarkozy has no choice ,he must work at bringing France's budget into line with the new Euro draft by France and Germany. If Sarkozy is out this next election and the draft is not ratified ,there is a very good chance that it will not, resulting in further kaos within the Euro Zone.
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