MBruno Le Maire is, as usual, omnipresent in edial these days. A visit to a Renault factory in Normandy, a trip to a solar park in Provence, a reception from Robert Habeck and his Italian counterpart in Paris next Monday – one public appearance follows the next for France's finance and economics ministers. He usually gives accompanying interviews with the local press every week, while his ministry has been turning down offers of talks from the FAZ for months.
Le Maire also recently published a book again. After last year's novel with erotic passages, this time it is a sober non-fiction book called “The French Way”. In it, Le Maire presents his vision for the country as well as his own political ambitions and calls for a move away from the overly generous welfare state; He has never made a secret of his desire to inherit President Emmanuel Macron in 2027.
As the guardian of the cash-strapped French treasury, Le Maire is actually under great pressure to demonstrate and deliver his political skills now. Instead of the planned 4.9 percent, the budget deficit last year was 5.5 percent, as the national statistics office confirmed last week.
The President of the French Court of Auditors, Pierre Moscovici, spoke of a “very worrying public finance situation” and a “credibility problem” within the eurozone. Especially since the 4.4 percent targeted for this year has also become shaky after Le Maire had to revise his optimistic forecast for economic growth from 1.4 to 1.0 percent. Even if sustainability is not in acute danger, the national deficit must now finally be brought into balance, warned Moscovici.
Around double again
Against this background, criticism of Le Maire's media presence is inevitable. There were many ideas in his book, “it's a shame that the author isn't the Minister of Economic Affairs,” Macron is said to have joked, according to the business magazine “Challenges”. The French central bank governor François Villeroy de Galhau also expressed clear criticism. “For fifteen years, our country and its successive governments have failed to meet their multi-year commitments to balance” public budgets, he said last week.
The warnings are no coincidence: between the end of April and the end of May, the three most important rating agencies, Fitch, Moody's and S&P Global Ratings, judge the creditworthiness of the French state. A downgrade could make borrowing on the financial markets more expensive – and would severely restrict the government's already limited scope for distribution.
France currently pays around 2.9 percent interest on bonds with a ten-year term. That is almost half a percentage point more than Germany and is therefore still a long way from the almost 2 percent reached in the European sovereign debt crisis, but three years ago this “spread” was still around half of today's value.
Weaker economic growth and reduced tax revenue are now forcing Le Maire to plug an unplanned hole in the French state budget. Loan authorizations of over 10 billion euros have already been canceled, but according to the ministry, the savings required for the upcoming budget planning are around twice that.
However, how this will succeed is still completely open. “We can certainly make savings in public spending without reaching into the pockets of the French,” Le Maire told radio station RTL. Tax increases are out of the question for him. “I refuse to give in to the complacency that is common in difficult times,” the minister added in a guest article for the business newspaper “Les Echos”.
10 percent of French taxpayers account for three quarters of income tax revenue, a special levy introduced on high incomes in 2011 is still in force and the marginal tax rate has reached a record high of 60 percent in Europe. Turning the tax screw even further would endanger the economic policy successes of recent years – and would be an escape from the difficult debate about reducing public spending, argues Le Maire.
However, the tax debate is far from over. On the one hand, Prime Minister Gabriel Attal declared additional burdens on the middle class and companies to be a “red line” in a recent television interview. At the beginning of this week, however, he announced that a working group would be convened to develop proposals for a yet unspecified taxation of “super profits” by June.
Attal is responding to demands that are being raised not only by the left-wing opposition parties, but also from the ranks of the presidential majority. This also includes higher taxes on share buybacks and capital gains or the suspension of the promised reduction in production tax, which is levied regardless of profits and has long been a thorn in the side of French employers. The reintroduction of the wealth tax, which was converted into a pure real estate tax at the beginning of Macron's term in office, is also being discussed.
In mid-April, Le Maire wants to present key figures on how the deficit can be brought below the European target of 3 percent by 2027. The planned savings are to be presented at the end of June, after the European elections.
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