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French PM pledges cuts in taxes and labour costs

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French PM pledges cuts in taxes and labour costs
French PM Manuel Valls promised a raft of cuts in labour costs and taxes on Wednesday. Photo: Patrick Kovarik/AFP
16:19 CEST+02:00
France's Prime Minister Manuel Valls unveiled a sweeping package of reforms and cuts on Tuesday intended to rekindle the country's flagging economy. He later passed a vote of confidence from lawmakers in the National Assembly.

In his first major address after being named prime minister last week, Valls unveiled a wide-ranging package of reforms and cuts, many of which are aimed at lifting France out of its stubborn economic crisis and bringing down the country's record unemployment rate.

In a muscular 47-minute speech Valls laid out the economic priorities of his streamlined, reshuffled government to the National Assembly. Valls said the measures were aimed at boosting competitiveness and increasing the spending power of consumers.

"Too much suffering, not enough hope, that is the situation of France," he said, kicking off the speech.

In his comments in which he vowed to "open a new chapter" for the Socialist government of President Francois Hollande, Valls outlined a series of measures aimed at reviving the economy.

Valls also easily passed on Tuesday a vote of confidence in his new government, which was formed after President François Hollande moved aside his predecessor Jean-Marc Ayrault after the Socialist party took a drubbing in local elections last month. 

Here's what Valls is promising to do to turn the economy around:

  • The prime minister said that starting in January 2015 taxes for those making the least will be reduced, which will mean an extra €500 per year in the pockets of those concerned. In all Valls promised €5 billion in tax cuts for "modest households".
  • Valls announced €30 billion in reductions to employer payroll charges would be introduced by 2016. Under the plan, employers would not have to pay charges for minimum-wage employees, something he called "a true revolution".
  • Valls said the government is going to cut €50 billion from the budget.  The cuts are to include €19 billion from state spending, €10 billion from the national health spending and €10 billion euros from local governments. He did not specify where the rest would be found, though this promise was already made by Hollande in January.
  • The PM wants to simplify the tax system by eliminating France’s so-called ‘small taxes’ which bring in under €150 million each per year. Some of the taxes, which target pinball machines or cross country skiing, are seen as an unnecessary drag on business and added complexity for the state to assess and collect.
  • France is going to step up its “low carbon strategy” for energy production by setting targets of reducing fossil fuel consumption by 30 percent and greenhouse gasses  by 40 percent between now and 2030. Valls' government will also propose a law by the summer that aims to reduce the counrty's reliance on nuclear energy by 50 percent by 2025.
  • The government will cut the number of France’s administrative regions, of which there are currently 27, in half. Valls promised to have a the new map drawn up by January 2017. He said the regional-level councils will also be done away with by 2021. France’s sometimes overlapping levels of bureaucracy has been cited as a barrier for companies wishing to set up shop here.

The new PM insisted "we must straighten up our public finances but not by destroying our social model or our public services."

"I am for respecting our commitments, for budget responsibility, not for austerity," Valls said.

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