Macron’s Economic Agenda Faces First Test in Divided Assembly
(Bloomberg) -- French President Emmanuel Macron’s government unveiled a package of measures aimed at sheltering households from the shock of surging inflation, in the first test of whether his economic agenda will survive him losing an outright majority in parliamentary elections last month.
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In normal times, the measure would be uncontroversial as they respond to widespread concerns over the dwindling real incomes of households as prices rise. But this is the first time in decades that the country’s president does not have enough seats to pass laws expediently with little modification.
Macron’s government is counting on a new form of compromise in French democracy that could need cooperation from the far-left or far-right fringes of a now fractious parliament. Yet at the same time there is little room for maneuver, as his team has also set limits on what they are willing to concede, including sticking to pledges to both rein in the budget deficit and not raise taxes.
“French people demand an emergency response and we are determined to provide it,” Prime Minister Elisabeth Borne said. “These bills will be a moment of truth for our capacity to respond.”
The package is made up of two bills: One is to amend the 2022 budget and another grouping efforts to help families and businesses survive price increases. Macron’s government is also proposing incentives for firms to share profits with workers, increases in pensions and benefits, and the abolition of the annual 138 euro TV license fee.
The measures will cost about 20 billion euros ($20.4 billion) and will be presented later Thursday to the finance committee of the National Assembly, which is now headed by Eric Coquerel, a senior lawmaker from the far-left France Unbowed party.
They are in addition to around 25 billion euros of spending announced earlier in this year to cap energy prices and compensate households for some rising costs. That “tariff-shield” would be extended to the end of the year if the bills pass parliament.
In the National Assembly, the far-right wants a massive cut in value added sales tax on car fuel and other products. The center-right wants more tax cuts. The left, meanwhile, wants a much higher pay increase for public servants.
“Many amendments will occur, many discussions, but more on ‘how much’ and ‘how long’ than on the principle of the bill itself,” said Lisa Thomas-Darbois, a French politics expert at the Paris-based Institut Montaigne.
Navigating the varying demands will be all the more difficult as France’s public finances have reached what Finance Minister Bruno Le Maire has described as an “alert level,” even as higher-than-expected tax receipts in 2021 are expected to cover much of the new plans. The state auditor also warned earlier Thursday that high debt and deficit in the country put the whole euro area at risk, while the Bank of France called for new aid for households and firms to be temporary and targeted.
“We don’t want another ‘whatever-it-costs’ approach,” Le Maire told Europe 1 radio earlier Thursday. “Our public finances won’t allow it.”
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