Will cut spending despite fuel tax freeze, claims France

PTI

Le Mans : A demonstrator stands in front of a makeshift barricade set up by the so-called yellow jackets to block the entrance of a fuel depot in Le Mans, western France, Tuesday, Dec. 5, 2018, with banner reading "Stop the Government racket".  French government's decision to suspend fuel tax and utility hikes Tuesday did little to appease protesters, who called the move a "first step" and vowed to fight on after large-scale rioting in Paris last weekend. AP/PTI

Le Mans : A demonstrator stands in front of a makeshift barricade set up by the so-called yellow jackets to block the entrance of a fuel depot in Le Mans, western France, Tuesday, Dec. 5, 2018, with banner reading “Stop the Government racket”. French government’s decision to suspend fuel tax and utility hikes Tuesday did little to appease protesters, who called the move a “first step” and vowed to fight on after large-scale rioting in Paris last weekend. AP/PTI

Finance Minister Bruno Le Maire said on Tuesday that France would stick to its EU commitments to slash public spending, despite a decision to suspend a fuel tax to quell fierce protests.

“There is a course set by the French President Emmanuel Macron, which is to respect our European commitments, reduce spending, reduce debt and reduce taxes, and that course will be maintained,” Le Maire told journalists in Brussels.

Earlier, Prime Minister Edouard Philippe had announced the suspension for six months of an increase in fuel tax after the country was rocked by intense street clashes and vandalism in Paris over the weekend.

He will also freeze gas and electricity prices over the winter in a bid to resolve the “yellow vest” crisis.

According to a European source, these measures should lead to a shortfall of nearly two billion euros in France’s 2019 budget plans, equivalent to 0.1 percentage points of gross domestic product (GDP).

But the French prime minister suggested that the tax freeze would not undermine the government’s public debt objectives.

“If taxes go down, spending will have to go down, because we don’t want to leave debts to our children. These debts are already considerable,” Philippe warned.

The EU projects that France’s debt will hit 98.7 per cent of GDP in 2018, far above the 60 per cent of GDP limit set by European rules and more than the Euro zone average, which stands at around 86.9 per cent of GDP.

France’s deficit in 2017 finally made it under the EU’s deficit cap of three per cent of GDP, after years of being above the limit.

Before the tax suspension, France was projected to have a deficit of 2.8 percent in 2019.

(With inputs from agencies)