Hollande outlines tax plans as economy slides

LAST night the French public got a peek into a future of spending freezes, tax squeezes and little if any economic growth.

President François Hollande used an appearance on the TF1 channel to outline how the government intends to raise €30bn of savings and new taxes over the next two years.

He said that to balance the budget required everyone to make an effort as he looked to tackle high joblessness, falling competitiveness and a slowing economy.

But he has not been helped this morning by the Banque de France saying it expects to see the economy decline by 0.1%, following nine months of zero growth.

Yet François Hollande has been making his calculations for his 2013 budget based upon a growth 0.8%, so we may yet see even tighter fiscal measures.

During his interview on TF1 he said that the 75% tax rate on those earning over €1m a year would be brought in and that he was looking to raise €10bn from 'well off' French households.

This measure gained extra significance over the weekend when France's richest man, Bernard Arnault, the CEO of LVMH, a French brand group that includes Christian Dior and Louis Vuitton, said he had applied for Belgian nationality.

Whilst he denied that it was for tax reasons, saying it was to aid a business proposal, it did not prevent him being heavily criticised by politicians and the press, including today's Libération newspaper that featured a front page image of Bernard Arnault with the blunt headline Casse-toi riche con!

François Hollande said that education, security and justice would see their budgets for 2013 protected, but that other departments would have to make savings, stressing that not a euro more would be spent next year than spent this year.

Larger businesses can also expect to see tax levels increased, something that critics are likely to seize upon as a break on job creation, and which are ultimately likely to be passed on to consumers in higher prices.

There is little room for manoeuvre for François Hollande, with the economy stagnating, and his country's closest trading partners in Europe sliding into recession, there is an air of 'batten down the hatches' as storm clouds gather both inside and outside French borders.