President Emmanuel Macron has loosened labour laws and cut taxes among other reforms to transform the economy, but has not broken France’s addiction to spending big to buy social peace.
Eager to turn the page on months of protests against his plans to raise the retirement age by two years to 64, Macron promised last month to cut taxes on the middle class by 2 billion euros ($2.2 billion).
With France’s debt among the highest in Europe at nearly 110% of economic output, his plans met with stern warnings from the public audit office and the central bank that France can ill afford tax cuts without slashing expenses as much.
“We need to make a bigger effort on the public finances, we need to be careful about unfunded tax cuts and letting spending grow too quickly,” Bank of France Governor Francois Villeroy de Galhau told a conference on Thursday.
Ratings agencies are taking note too of France’s lack of progress in bringing down the national debt, which spiralled during the COVID-19 crisis and now stands just shy of 3 trillion euros.
While the pension reform aims to ease the financial burden, ratings agency Fitch nonetheless downgraded France’s public debt at the end of April, saying potential political paralysis and social unrest posed risks to Macron’s reform agenda.
Source : Saltwire