June 30 and July 7, French political parties of both the far right and far left are vowing to cut gasoline taxes, let workers retire earlier and raise wages.
The political pledges to put money in voters’ pockets sent economists reaching for calculators. Their answer: The costs could be considerable, at least tens of billions of euros.News of National Rally’s political ascendance sent France’s CAC 40 stock index tumbling to its worst week in more than two years, although the market calmed somewhat last week. Yields on French government bonds also rose on worries about the potential strain on government finances.
Bardella vows to slash sales taxes — from 20% to 5.5% — on fuel, electricity and gas, “because I think there are millions of French people in our country who this year can no longer afford to heat themselves or are forced to limit their trips.” The Paris-based Institut Montaigne think tank estimates the cost of that pledge at between 9 billion and 13.6 billion euros annually in lost revenue. France’s Finance Ministry estimates an even bigger dent in public coffers: 16.8 billion euros per year.
France’s deficit last year stood at 5.5%. The EU’s Commission recommended that France and six other countries start an “excessive deficit procedure,’’ beginning a long process that can ultimately force a country to take corrective action. Something similar might happen if a right- or left-wing French government chose to ignore the EU’s budget rules and went on a spending spree that sent French bonds tumbling and interest rates higher. The European Central Bank might then be forced to buy French bonds to drive yields lower and calm markets.