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BUDGET

France’s belt-tightening budget gets green light

The French parliament on Thursday approved a belt-tightening budget for 2014 with huge spending cuts and tax hikes in a bid to rein in the country's high public deficit.

France's belt-tightening budget gets green light
France's controversial budget for 2014 has finally been adopted by parliament. Photo: Joel Saget/AFP

The second budget of Socialist President Francois Hollande's government had been rejected by the Senate but passed on Thursday in the lower house, although the main opposition centre-right UMP party and the far-right National Front voted against it.
   
The budget will now have to be approved by the Constitutional Council —  France's top court — before the end of the year.
   
Based on projected economic growth of 0.9 percent in 2014, the budget aims to bring down the public deficit from the current level of 4.1 percent to 3.6 percent of gross domestic product (GDP).
   
The European Commission, the executive arm of the European Union, this spring gave France two more years to bring down its deficit to the EU target of below three percent.
   
Budget Minister Bernard Cazeneuve said €15 billion ($20 billion) will be saved through spending cuts.

However key areas including employment, education and security will not be be affected and actually see their budgets increased.
   
The government has also unveiled tax increases but was forced to backtrack on one of them — the so-called "ecotax" on commercial vehicles carrying cargo of more than 3.5 tonnes — after violent protests in Brittany, a predominantly agricultural region in northwestern France.
   
The new measures see the top VAT rate going up from 19.6 to 20 percent from January 1st, the mid-range rate increase from seven to ten percent while the lower rate on basic goods will be maintained at 5.5 percent.
   
The surtax on companies posting a turnover of more than 250 million euros will also double to more than 10 percent. This measure is targeted to bring in 2.5 billion euros a year.
   
Companies and households in France, the eurozone's second economy, have been hit by a steady increase in taxation since Hollande took power.
   
The French opposition right has described the latest measures as "artificial" savings and accused the government of fudging figures.

It argues that the steps "penalise" the middle classes.

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BUDGET

Paris, Berlin agree on future eurozone budget: French ministry source

France and Germany have agreed on the broad outlines of a proposed eurozone budget which they will present to EU finance ministers in Brussels on Monday, a French finance ministry source said.

Paris, Berlin agree on future eurozone budget: French ministry source
French Economy and Finance Minister Bruno Le Maire (R) and German Finance Minister and Vice-Chancellor Olaf Scholz. File photo: AFP

The common single-currency budget was one of French President Emmanuel Macron's key ideas for protecting the euro, but it caused differences between France and Germany, the region's two largest economies.

French Finance Minister Bruno Le Maire and Germany's minister, Olaf Scholz, will “jointly present a proposition on Monday… about the layout for a budget for the eurozone,” the ministry source told AFP.

“It's a major step forward,” the source said. “We will look forward to sharing with other members.”

The source said the amount of the budget has not been established as the proposal was to first set out the “architecture and main principles” of the budget.

According to a copy of the French-German proposal, the budget would be part of the EU budget structure and governed by the 19 euro members.

Macron will travel to Berlin at the weekend to meet with German Chancellor Angela Merkel where the two leaders will bolster their alliance as champions of a united Europe.

READ ALSO: France and Germany push for compromise on eurozone reform

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