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France: rigor for (almost) all

May 27 category:Economy
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France: rigor for (almost) all

François Fillon. The Prime Minister promised in Brussels to reduce the public deficit from 8% to 3% of GDP in the year 2013. This will not happen without effort ...


In France, Taking rang, and the bill looks painful for a country that does not balance its public accounts only once since 1974, nor ever observed budgetary roadmaps discounts in Brussels. "The strategy of permanent deferral is no longer possible because the financial markets, which are also our creditors will do the most," warns Bruno Cavalier, chief economist at Oddo Securities.

Find hundreds of billions of euros

Therefore, should we believe François Fillon, the prime minister, who promised the Commission in Brussels to reduce the public deficit from 8% of GDP this year to only 3% in 2013? "For this, we must find no less than one hundred billion", calculates Mathilde Lemoine, HSBC's chief economist in Paris. Slightly more than 5% of national wealth over the next three years. "If a plan of this scale is set up, France has never known such a cure of austerity. The Delors plan in 1983, Juppe in 1995 have been half as severe," says Jean-Marc Daniel, Professor of economics at ESCP-EAP and Director of Societal magazine.

For now, the account is not there: iconic extent Fillon government if any, non-replacement of retiring in two in the public service will save only 500 ... million per year. The government will also address the tax issue, as was the case with previous austerity plans. "A Bercy, we realized that we could not type on businesses, the risk of a new wave of bankruptcies and unemployment," said a connoisseur of tax records. It is therefore especially families, in their different roles (savers, consumers ...), who will pay the bill.

The addition (subtraction?) Will be more heavy that inflation is unlikely to come to lighten. "The risk is even fall off the side of deflation, a gear in which downturns, prices and employment converse", fears Pierre-Cyrille Hautc heart, economist and historian at the School Economics of Paris. One example is the German stabilization plan in the late 20s, which led to the great deflation of the 30s The rest is history ...

Fortunately, top out there: Canada and Sweden have borrowed from the early 90s, background fills in reforming their administrations. France, where the state spends 100 billion euros more per year than Italy or Germany to administer the country, on this ground considerable margins. Engage in it is the historical responsibility of Nicolas Sarkozy and his government.

Investors - Last contribution, especially the wealthier

They should make a profit on one hand but losing the other: economic rigor did the trick investors. In 1983, the austerity program of the government of Pierre Mauroy dramatically raised the Paris Stock Exchange (+ 57% over the year). And François Fillon? "Markets like outspoken," said one trader. More presentable public accounts reassure international investors, while the CAC 40 blue chips will reap record profits on dynamic global markets. Such as stocks, bonds should not suffer too much rigor. Price stability protects the purchasing power of investors.

This performance should mitigate the bitter potion tax that the government is about to administer to investors, the first to participate in the great effort of national solidarity. Furthermore an additional CSG waited on their capital gains, they will probably victims of planing opportunities offered by tax exemption tax loopholes. The wealthiest French, who are almost all investors, will also suffer, according to the policy paper on pension reform, a "complementary solidarity contribution that will not give right to restitution under the tax shield."

Officials - They will not escape the pension reform

Will the French officials be seasoned with the same sauce that their Spanish colleagues, Greek and Irish, whose salaries have been revised downwards? For now, it does not matter even if the government put the state on the wagon for three years. However, there are questions about the maintenance of the 0.5% increase expected by mid-year. And especially on wage developments in the coming years. "We expect the negotiations of 2011-2013, in mid-June to learn more," says Brigitte Jumel, Secretary General of the Union of Federations of Public and Allied Employees CFDT. One thing is certain: the officials will not escape the pension reform. Among the assumptions in the study, an increase in their contributions, lower than in the private sector (7.85% against 10.55%).

As to freeze government spending for three years worth, it means that departments will have to reduce their operating costs by 5% in 2011 and 10% by 2013. The unions therefore anticipate a deterioration of working conditions in a tense situation because of the 100,000 jobs lost in three years.

Pensioners - Spared for now, but stay

Nicolas Sarkozy has repeated: today's retirees will not be affected by the reform. Unlike pensioners Sweden or Germany, countries that have linked changes in pensions to the financial position of pension plans. Contrary to the Greek as seniors, who will lose their thirteenth and fourteenth monthly payments. The idea of ​​aligning the taxation of pensioners those of the assets, agitated by many economists, is rejected.

Moreover, the government committed to "not reduce deficits by lowering the pensions of retirees of tomorrow." Edouard Balladur was charged in 1993, and it seems difficult to go further. "In thirty years, the average pension will account for only 59% of average earnings, against 72% at present," said Henri Sterdyniak, pension specialist at OFCE.

Since 1993, in fact, the wages used to calculate retirement are adjusted for inflation, not income. Ditto for the point value of supplementary pensions. The decline in the purchasing power of pensioners is indeed set.

Taxpayers - The first referred to the national effort

A tribute to the victory of François Mitterrand? Monday, May 10, before an audience of unionists gathered at the Elysee Palace, Nicolas Sarkozy écornait for the first time its dogma of the tax status quo: "Reform [implies] an additional financial effort of high income and capital income." Taxes will therefore increase due to the need for a balanced budget.

According to his calculations, route VAT from 19.5 to 25% would yield 40 billion euros. "The Germans affect the repayment of debt a share of revenue from the increase in VAT. This idea attracted many to Bercy," said one union ministry. In April, L'Expansion, 46% of UMP parliamentary commissions of Finance of the National Assembly and the Senate dime held the idea of ​​a social VAT.

The fiscal incentives in sight. In the program, therefore, more taxes and less tax breaks. The government wants to shave 5 billion in two-year tax loopholes that cost him 70 billion. The fiscal incentives offered overseas could pay the price. Not to mention the penknife that MPs and ministers would gladly give the tax shield: the device exclude local taxes, raise the maximum rate of 50 to 60% ... The ideas, they, are not lacking.

Recovery, stabilization, austerity and rigor throughout the history of France


This is the first recovery plan in the history of the Republic. Leon Say, Minister of Finance, decided to restructure the debt by reducing from May to March% compensation of government bonds, and is committed to keeping the public accounts in balance.


Raymond Poincaré stabilization plan is severe: devaluation of the franc by 80%, doubling the tax rate on profits from 6 to 12%, creating the first tax on gasoline, wage freeze for civil servants and deleting sub-prefectures.


On the menu of Pinay-Rueff plan adopted on December 23: severe weight loss cure administration, the elimination of price indexation, a VAT increase and a decrease of 3 points of GDP in public spending. Finally, the franc was devalued by 18% and replaced by a "new" franc equal to 100 "old".


On 22 September 1976 the Council of Ministers adopts the forefront of "austerity" by Raymond Barre. The program includes wage and price freeze for three months, increased income tax and taxes on gasoline and alcohol, 1-point increase in pension contribution rates.


Given the failure of recovery in 1981, Jacques Delors takes the turn of the "rigor": increase in the income tax, increase in auto sticker, taxes on alcohol and tobacco, the hospital plan and gasoline. The franc was devalued. Bill: 2% of GDP.


Monetary union in sight, France can no longer devalue. Austerity to Juppé mode changes in fiscal policy, in particular by extending the duration of pension contributions.


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