Pressure mounts on France’s Barnier not to raise taxes despite budget disaster

Macron's camp threatens to drop support to new French prime minister if he raises taxes.

Sep 18, 2024 - 19:00
Pressure mounts on France’s Barnier not to raise taxes despite budget disaster

PARIS — New French Prime Minister Michel Barnier was saddled with the dirty job of putting France’s precarious public finances back on track.

But heavyweights from French President Emmanuel Macron’s might make that job more difficult. They are accusing Barnier of plotting to raise taxes and threatening not to support his future government if he does so.

“It is out of the question for us to join a government … that raises taxes,” outgoing Interior Minister Gérald Darmanin said on Wednesday in an interview with French broadcaster France 2. Darmanin added that in a private meeting, Barnier discussed the possibility of tax hikes.

France’s new prime minister has not yet presented his government or its program, but he already started working on France’s next budget, looking for ways to cut the country’s massive debt.

“Michel Barnier even said he was in favor of tax justice. Usually, when you say you’re in favor of tax justice, it means you’re in favor of raising taxes,” Darmanin added.

Outgoing Prime Minister Gabriel Attal also questioned Barnier’s plans. In a private message addressed to members of his parliamentary group, Ensemble, and seen by POLITICO, Attal said that despite several meetings with Barnier, he was still not reassured on the premier’s program and “in particular on possible tax hikes.”

Barnier’s office was quick to react and remind that something should be done to address France’s deficit, which he called “very serious.”

“This situation deserves more than small talk. It demands responsibility,” Barnier said in a statement on Wednesday. “We already have the highest tax burden in the world.”

Barnier had previously said that he would consider tax changes to stop France’s massive debt from ballooning.

Barnier and Attal were supposed to speak again on Wednesday, but their meeting was delayed, according to Barnier’s office.

Floating the idea of new taxes, however, could be a a political tactic — a way for Barnier “to start flirting with the left” and seeking their support, a former minister from Macron’s camp told POLITICO.

Debt bomb

Barnier faces tight deadlines to finalize a French budget for 2025 and, in parallel, to send to the European Commission a credible debt reduction plan and reform proposals for the coming year to bring down France’s worryingly high debt levels.

According to the finance ministry, French debt could reach 5.6 percent of the country’s GDP this year, far above the three percent required by the EU’s spending rules.

France is already under a so-called excessive deficit procedure for breaching those rules last year and could face fines if it fails to significantly reduce its deficit.

The outgoing government promised that it would bring the deficit below three percent of the GDP by 2027 to comply with the EU spending rules. Former Finance Minister Bruno Le Maire, who left politics last week, argued that France could still keep keep that promises if it manages to cut spending and to introduce new taxes. He floated taxing share buybacks and electricity production as options.

But both the governor of the French central bank, François Villeroy de Galhau, and the president of France’s Court of Audit, Pierre Moscovici, said that it will be impossible for France to keep any promises to easily bring its budget in line by 2027 and urged the new government to tell the truth to the French people.

In an interview with Le Parisien, Villeroy de Galhau said that tax reductions implemented under the tenure of Macron are part of the problem, and France should consider higher taxation on big companies and rich individuals.

“We will have to lift the taboo on tax increases,” he said.

Anthony Lattier contributed to this report.

What's Your Reaction?

like

dislike

love

funny

angry

sad

wow