France aims to end spending ‘addiction’

Prime Minister Edouard Philippe said France must break the addiction to public spending that has left its economy trailing peers as he outlined plans to rein in the budget and cut taxes.

In his maiden speech at the National Assembly as premier, Mr Philippe promised €20bn of tax cuts by the end of President Emmanuel Macron’s term in 2022. Spending will drop by the equivalent of 3 percentage points of GDP in that time and taxation will fall by 1 point, he said.

“We must face the truth about the financial situation of the country,” Mr Philippe said.

“France can no longer be the champion of both public spending and of taxes. France has an addiction to public spending, and like all addictions, it requires willpower and courage to kick it,” he said.

Mr Philippe spoke a day after President Macron addressed a joint session of congress in Versailles.

While President Macron’s speech was a lofty call for French renewal, Mr Philippe provided the nuts and bolts, laying out the timetable and the specific steps the government will take to revive an economy that has underperformed the eurozone for the past three years with unemployment roughly double the rate of the UK and Germany.

Payroll taxes will be cut starting in 2019. Corporate income tax will be lowered gradually from 33.3% now to 25% in 2022 to converge with the European average.

The wealth tax will be limited to real estate assets starting in 2019. And those actions will be achieved while keeping France’s commitment to its European partners to limit the deficit that has been part of every government budget for the past three decades.

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