Before implementing the tax overhauls Macron promised during his presidential campaign, the government led by Prime Minister Edouard Philippe will first make sure the French budget deficit is brought under the EU-imposed limit of 3 percent of GDP — for the first time in years.
The new president’s emphasis on tackling the deficit to the detriment of tax reform may help reassure the German government of Angela Merkel that it’s at last dealing with a fiscally serious French counterpart, as both countries want to restart the Paris-Berlin motor for Europe. France’s budget deficit has been above the 3 percent limit in 13 of the 18 years since the threshold was adopted, as economist Charles Wyplosz recently noted. [...]
“They had a choice: Forget about the 3 percent, blame Hollande for the miss and start right away on tax cuts; or play the credibility card. They chose the latter,” said a Treasury official, adding that he was happy with the decision.
“There was a debate in French government circles between economists favoring reforms and growth and the Treasury guys intent on the 3 percent limit, and the Treasury guys won,” noted Gilles Moëc, chief economist at Bank of America Merrill Lynch in London. [...]
Another reform — the exoneration of financial holdings from France’s infamous wealth tax — has also been delayed until 2019, even though Philippe promised it will be voted along with the 2018 budget, in October.
As for the labor reforms, they will continue unabated, the former Macron campaign economist noted. Macron chose the labor market overhaul as the international symbol of France’s ability to reform its economy. But according to most economists, it will have a limited impact on actual jobless numbers.
No comments:
Post a Comment