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Macron’s economic plan avoids tough budget questions

In World
January 17, 2024

PARIS – French President Emmanuel Macron steered clear of tricky budget questions about where billions of euros in cost savings will be found when he sketched out his plans for the rest of his term in office.

France needs to find huge budget savings each year for the rest of Macron’s term ending in 2027 if it has any hope of sticking to a commitment of bringing the budget deficit in line with EU rules by then.

But instead of preparing the ground for budget cuts, Macron flagged plans to go ahead with 2 billion euros ($2.2 billion) in tax cuts for the middle-class next year in a news conference late on Tuesday to outline his priorities for the rest of his term.

With European Parliament elections in June, Macron needs to claw back support from middle-class voters to narrow the far-right National Rally’s sizeable lead over his party.

That leaves the unpopular task of finding budget cuts to his veteran Finance Minister Bruno Le Maire, who said on Monday he would make proposals “in the coming days”.

The government has already found 16 billion euros in savings for this year, mainly by phasing out temporary measures to offset high energy prices for consumers.

With a target for a further 12 billion in 2025, finance ministry officials have suggested that France’s 110 billion euros in business subsidies could be in the firing line.

They have also raised the possibility of reining in the 16 billion euros spent annually on medical equipment and have raised the possibility of selling state-owned real estate and reducing unemployment benefits for seniors.

Macron said that the deductible for medication reimbursements by state health insurance would be doubled, albeit from 50 euro cents to 1 euro.

His government has committed to reduce the budget deficit from an estimated 4.4% of economic output this year to below an EU ceiling of 3% in 2027.

While France has a long history of flouting that limit, a revision of EU fiscal rules at the end of last year make that more difficult.

“The main thing now is to apply (the rules) and for our country to stick to its commitments until 2027. That would be very new and therefore welcome,” Bank of France Governor Francois Villeroy de Galhau told the Senate on Wednesday. REUTERS

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