A new round of French measures aimed at mitigating the effects of record inflation will cost about 20 billion euros (US$20.4 billion), according to Finance Minister Bruno Le Maire.
The steps will be targeted more at workers, after the state already used about 26 billion euros this year for energy-price caps and fuel discounts to shelter firms and households, Le Maire said. Higher-than-expected tax receipts in 2021 will help finance the plan, which includes public-sector pay increases and targeted fuel rebates for drivers.
“We need to move to measures that are targeted and temporary,” Le Maire told Europe 1 radio. “We don’t want another ‘whatever-it-costs’ approach — our public finances won’t allow it.”
While France is grappling with inflation that hit 6.5% last month, the euro zone’s second-biggest economy has fared better than most of the continent on prices thanks to President Emmanuel Macron’s outlays on dulling the spike in energy costs.
Le Maire has already warned that the public finances are at an “alert level” after debt levels swelled during the pandemic and as interest rates rise. But he said higher-than-expected tax receipts in 2021 due in part to stronger employment would cover the costs of the new plans.
Still, to alleviate the pressure, the state has asked businesses to help ease inflation for consumers. Shipper CMA-CGM Group has said it will cut prices by 500 euros per container for some French customers, while TotalEnergies has proposed a summer discount for French holidaymakers.
Le Maire said he’d spoken with banks and insurance companies about how they could reduce costs for households. He once again ruled out tax increases, including so-called windfall levies on the most-profitable companies.
“I hope to have very concrete proposals because French people have spending-power problems right now,” Le Maire said. “It’s all very well raising taxes that go to the pockets of the Finance Ministry, but it doesn’t go to the pockets of French people.”
Le Maire said the new plans, to be submitted to cabinet later Thursday, will phase out a 18 cents-a-liter fuel discount by year-end. Car drivers who need their vehicles for work will instead be able to apply for a specific aid from October 1.
The measures face an uncertain future as the government will need to seek alliances in a fractious National Assembly, where Macron lost his absolute majority after elections last month. Le Maire said he’d seek compromises but there are “red lines” — including not raising taxes and taking a rigorous approach to spending to meet Macron’s objective of bringing the budget deficit back to 3% of economic output by 2027. –BLOOMBERG