Macron blows hole in budget with ‘yellow vest’ measures

PARIS: French President Emmanuel Macron’s measures to help low-income families and so end the “yellow vest” protests will blow a hole in the budget and perhaps his reputation too, analysts say. The 40-year-old leader came to power in May 2017 promising a new business-friendly France with healthy public accounts, ending the chronic deficits which have been the norm since the 1970s.

But economists estimate the cost of the sweeteners he announced in an address to the nation on Monday could reach 11 billion euros ($12.5 billion) — a blowout for a country already struggling to meet EU budget rules. The minimum wage will be hiked next year, labor taxes on overtime will be scrapped and a tax rise on pensioners introduced this year will be rolled back.

“Emmanuel Macron’s positive image in Brussels as a good steward of the budget is going to take a serious hit,” French financial daily Les Echos commented yesterday. The total bill for all the measures announced since last week to help mostly low-income “yellow vest” protesters from small-town or rural France is estimated at 15 billion euros-and counting.

Under EU rules that underpin the euro common currency, France is obliged to keep its budget deficit under 3.0 percent of gross domestic product-something it failed to do repeatedly until 2017. Last year marked the first time in more than a decade that the country was under the limit-with a deficit of 2.6 percentthanks to cost-cutting measures and higher-than expected economic growth. Next year, the government had forecast a slide back to 2.8 percent-even before the start of the protests, which are expected to have hit already slowing economic growth.

“In the first phase, there will be an increase in the budget deficit. We need to be clear. It’s obvious, it’s a question of priority,” Environment Minister Francois de Rugy told Radio Classique yesterday. “We aren’t saying that long term the debt isn’t a problem. But the first priority is not to discuss this with Brussels, but with the French people,” he added. Economists said Monday night’s measures would likely push the budget deficit out to between 3.0 and 3.5 percent of GDP. It could also tip France’s total accumulated debt above 100 percent of GDP for the first time, well beyond the EU’s 60-percent ceiling.

Macron has previously said he wants to reform and strengthen the eurozone single currency area, urging member states to stick to the rules. —AFP