July 4, 2017 / 2:41 PM / in 5 months

PM says time to end France's addiction to spending

PARIS (Reuters) - Prime Minister Edouard Philippe said on Tuesday it was time to end France’s addiction to easy public spending, promising to cut expenditures over the next five years and rein in debts he said were at an unacceptable level.

French Prime Minister Edouard Philippe delivers a speech on the government general policies plans at the National Assembly in Paris, France, July 4, 2017. REUTERS/Philippe Wojazer

New president Emmanuel Macron regards taming spending and reducing its budget deficit as key to winning the trust of European Union partner Germany and persuading Berlin to embark on reforms to shore up the bloc.

“The French are hooked on public spending. Like all addictions it doesn’t solve any of the problems it is meant to ease. And like all addictions it requires willpower and courage to detox,” Philippe told the National Assembly to applause.

Philippe said that for every 100 euros Germany raised in taxes it spent 98 euros, while France spent 125 euros for every 117 euros levied in taxes.

“Who really believes this situation is sustainable?”

The government and its program comfortably won a vote of confidence. The lower house, dominated by Macron’s Republic on the Move party, voted 370 in favor of the government with only 67 voting against - mostly far-left and far-right lawmakers.

Some 129 people abstained, with a large number of conservatives from the Republicans party not opposing the government. In total, 566 lawmakers voted.

Philippe’s talk of austerity comes just as other major economies such as Germany, the United States and even Britain are signaling an easing of fiscal policy to underpin growth.

But last week France’s independent auditor revealed a more than 8 billion euro funding shortfall in this year’s budget, forecasting a deficit once again above the EU cap of 3 percent of national income.

Philippe, a relatively unknown conservative before he was picked by Macron, said his objective was still to haul the deficit below the EU’s cap this year and he would target cuts in spending by three percent of national income over five years.

However, in a sign of how Macron and his government are having to re-adjust the timing of tax cuts after the extent of the budget overshoot was revealed, Philippe announced a year’s delay to a key campaign promise.

He said the centrist government would convert the last Socialist government’s flagship “CICE” tax credit for companies into a permanent reduction in payroll charges in 2019.

Reforms to exempt non-property related assets from France’s wealth tax will also take effect in 2019, he said.

For highlights of Philippe’s comments, click on

“WE DIDN‘T ELECT MERKEL”

Some opponents said Macron should take responsibility for government finances since he served as economy minister from 2014-16 under his Socialist predecessor Francois Hollande.

“Mr Macron ... won’t kid anyone that he wasn’t responsible too,” said Christian Jacob, head of conservative party The Republicans in parliament.

Jean-Luc Melenchon, head of the far-left party France Unbowed, and far-right National Front leader Marine Le Pen accused Philippe of ignoring the anger of voters with measures they said would hurt their spending power.

“You’re setting off fireworks in a powder keg,” Melenchon said. “We didn’t elect (German Chancellor Angela) Merkel.”

Philippe acknowledged that a record high abstention rate in June’s parliamentary election meant his government would have to tread carefully with its social and economic reform agenda, but that France could not ignore its problems.

“No one takes this majority as a blank cheque,” the prime minister said in a more than hour-long speech that ranged from climate change to Britain’s planned departure from the EU and was peppered with applause.

In a dig at U.S. President Donald Trump ahead of this week’s G20 summit, Philippe said that people who turn their backs on the Paris climate change deal showed “more than just a simple misunderstanding of the world that is coming”.

“The ostrich is without doubt a nice animal, but putting your head in the sand has never prepared anyone for the future.”

On Europe, Philippe stressed Macron’s stance that any talks with Britain over its future relationship with the EU would only come after orderly negotiations over its exit from the bloc.

“Conducting orderly negotiations over the United Kingdom’s exit will be a prerequisite for the future relationship’s framework,” Philippe said.

Macron on Monday made clear his impatience to complete the reshaping of France’s political landscape. He wants to reform institutions, including cuts to the number of parliamentarians and introducing a degree of proportional representation.

Additional reporting by Paris bureau; writing by Richard Lough; editing by Mark Heinrich

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