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France's Fiscal Tightrope: Balancing Deficit Reduction and ...
2024-10-04 23:55:10
Economy
Finance
Politics

France's Fiscal Tightrope: Balancing Deficit Reduction and Economic Stability

Image courtesy of : AFP (ALAIN JOCARD)

France faces a significant economic challenge as its public deficit surpasses 6% of GDP. Newly appointed Prime Minister Michel Barnier is tasked with reducing this deficit, which has expanded due to COVID-19 relief, energy subsidies, and tax cuts.

Barnier's strategy involves cutting spending by eliminating apprenticeship subsidies and increasing taxes on the wealthy and profitable companies. The goal is to reduce the deficit to 5% by 2023 and 3% by 2029. However, this plan encounters resistance from the left-wing New Popular Front, which threatens a no-confidence vote.

Economists are divided, with some cautioning that drastic spending cuts might lead to a recession. Politically, Barnier lacks a parliamentary majority, complicating budget approval.

Despite these hurdles, there is optimism from international bodies like the IMF, which believes Barnier can successfully navigate these challenges to avoid conflict with the EU's deficit rules.

Related news on that topic:

France's Fiscal Strategy Under Barnier

French Prime Minister Michel Barnier has unveiled a comprehensive plan addressing immigration and fiscal challenges. He introduced stringent immigration measures, including controlling arrivals and detaining illegal residents. Barnier emphasized the need for countries to assist in deportation processes by providing necessary documents. On the fiscal front, Barnier announced significant tax hikes targeting large corporations and wealthy individuals. His proposals aim to reduce France's budget deficit, which has drawn criticism from the EU. A temporary income tax increase and a tax on share buybacks are part of the €60 billion budget plan for 2025, which also includes extensive spending cuts. Barnier's initiatives are intended to counteract falling tax revenues and a rising deficit. However, he faces political hurdles, as his government lacks a parliamentary majority, potentially sparking opposition through a no-confidence motion. Despite these challenges, Barnier remains committed to presenting a viable fiscal plan to the EU, ensuring France's economic stability.

Germany Faces Prolonged Economic Challenges

Germany's economic outlook has dampened significantly, with the government now predicting a continued recession through 2024. The economy is expected to contract by 0.2% in 2024, following a similar downturn in 2023. This pessimistic forecast complicates tax assessments and budget planning, adding pressure to address structural issues like decarbonization, demographic shifts, and global competition, particularly from China. Economic Minister Robert Habeck remains hopeful for recovery in subsequent years, contingent on implementing measures such as growth initiatives, work incentives, and welfare sanctions. Despite efforts, high interest rates and uncertainty continue to stifle investments, and the current growth initiative may face obstacles from state-level resistance and financial constraints. The government is urged to act swiftly, with Habeck appealing for broader support from states and opposition parties to foster economic resilience. Analysts agree on the necessity of these initiatives but criticize their fragmented execution. As Germany navigates these economic headwinds, the focus remains on creating a sustainable path to recovery and addressing long-term growth concerns.

The press radar on this topic:

Deutsche Welle
4. Oktober 2024 um 12:33

Can France cut its spending without stoking recession?

Politics
Economy
Finance
France's public deficit exceeds 6% of GDP, pressuring new PM Barnier to cut spending. Deficit ballooned due to COVID-19 aid, electricity subsidies after Ukraine invasion, and Macron's tax cuts. Barnier aims to lower deficit to 5% in 2023 and 3% by 2029, with 2/3 from spending cuts like abolishing apprenticeship subsidies, and 1/3 from tax hikes on the rich, companies with exceptional profits, and capital gains. But left-wing New Popular Front alliance including France Unbowed, Socialists, Gree..
EuroNews
4. Oktober 2024 um 13:30

Barnier reveals a financial roadmap that includes higher taxes on the wealthy and postponing pension gains

Politics
Economy
Finance
Larger companies with annual revenues exceeding 1 billion euros will be subject to higher taxes, and the scheduled increase in pension payments will be postponed. There will also be a temporary increase in income tax for households with annual incomes exceeding 500,000 euros, and exceptional contributions will be demanded from wealthy French individuals to address tax evasion.
taz
4. Oktober 2024 um 15:42

France's Prime Minister gets started: A successful first serve

Politics
Economy
Finance
France's new Prime Minister Michel Barnier, 73, surprises with a calm inaugural speech; criticizes high government spending and wants to charge large companies and high-income earners; the left-wing opposition shows openness to compromises; Barnier distances himself from Macron's leadership style.
EURACTIV.de
4. Oktober 2024 um 16:00

French Left Submits No-Confidence Motion Against New Prime Minister

Politics
Economy
The French left-wing alliance Nouveau Front Populaire (NFP) has filed a no-confidence motion against the government of Prime Minister Michel Barnier. The motion is scheduled for Tuesday (October 8th) but has little chance of success. The leaders of the NFP wish that their candidate Lucie Castets would have had the chance to form her own government in the summer.
CW

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