Nicolas Sarkozy and Francois Fillon are delivering emergency economic measures
today, in order to ward off the ravening credit rating agencies that are questioning France’s AAA rating. As a prelude to this act of political drama, a group of France’s super-rich sent a letter to the government urging it to tax them more. In the spirit of solidarity, they said, they were willing to make a
“special contribution” to ensure that France’s budget deficit was brought under control.
This Gallic gesture might surprise some Anglo-Saxons and it’s rather touching. But it’s is pre-emptive in many ways. The rich are likely to be asked to lie back and think of France and the letter has the air of an affirmation of consent. Up until now, the French government has resisted the temptation to introduce large tax increases to reduce the deficit, but strong headwinds have forced it to change tack. The indications are that the government will raise an extra 14 billion euros over the next two years. Much of that new revenue will come from the introduction of a special tax on those earning more than 1 million euros (£900,000) a year, although precise details remain unclear. Tax breaks and loopholes are also expected to be closed, which will further disadvantage the wealthy.
The markets eyes, however, are likely to be on growth. France’s plan has relied on growth forecasts of 2 per cent this year, which has proved elusive. Some observers expect Fillon to downgrade his forecasts ahead of the official 2012 budget, which will be unveiled next month.
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