French PM Barnier flags tax hike on the wealthy

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(This Sept. 22 story has been corrected to say that French debt stands at 3.2 trillion, not million, euros)

By Mathieu Rosemain

PARIS (Reuters) – Prime Minister Michel Barnier on Sunday opened the door to raising taxes on France’s wealthiest individuals and some big corporations to help close a gaping hole in the public finances, but said he would protect the lower and middle classes.

President Emmanuel Macron’s office this weekend unveiled a right-leaning government which he hopes will break the political deadlock that followed a summer snap election. Its most immediate and daunting task will be to put together a budget for 2025 at a time France is struggling to contain a spiralling budget deficit.

“I’m not going to further increase taxes on all French people, neither on the most modest, nor on people who work, nor on the middle classes. But I cannot exclude the wealthiest from the national effort to rectify the situation,” Barnier told France 2 television.

France’s total debt stands at 110% of GDP, or close to 3.2 trillion euros. Weaker-than-expected tax revenues and higher spending by local governments has left its public sector budget deficit spiralling towards 6.2% of economic output next year if nothing is done to rein it in.

It is in breach of European Union deficit rules and credit rating agencies are scrutinising French decision-making carefully.

“A large part of our debt has been placed on international and foreign markets. We have to maintain France’s credibility,” Barnier said.

Barnier, who was the EU’s lead negotiator during Britain’s Brexit negotiations, also said he was open to changes to Macron’s pension reform but that any changes should not undermine the pension system’s precarious finances.

He said by way of example that he wanted to better take into account the hardships faced by working mothers over the course of long careers and that he was open to the input of employers and unions.

Macron’s political opponents on the left and far right have already threatened votes of no confidence against Barnier’s government. They say the government is not a reflection of how the French voted in the July poll.

“This is more Macron. It’s a government that has no future,” Jordan Bardella, chairman of Marine Le Pen’s National Rally party, earlier said.

Barnier’s government lacks a majority and will need to keep the far-right on side and deter it from voting to bring the government down if it is to survive. Perhaps with that in mind, Barnier said he would get tough on immigration.

“We need a European response. We need to take action at home too,” Barnier said. “We need to deal with the immigration issue much more rigorously.”