For those seeking evidence that Emmanuel Macron is set on a radical overhaul of the economy, France’s new budget, now being debated in the Senate, offers mixed evidence. For all his bold talk of “transforming” France, some measures—notably on public spending—so far look tentative, reports The Economist.
Undoubtedly there has been much to cheer. Mr Macron had already signed off on reforms to boost flexibility in the labour market earlier this autumn. Assessing the full impact of these is tricky, because implementation takes time and an upturn in the economic cycle means unemployment should drift down from 9.7% in any case. A big unknown is whether unions will keep their de facto power to set some national terms on pay and conditions, limiting firms’ flexibility no matter what the laws may say. Economists will be scratching their heads over this for years.
The budget is easier to assess. Two measures stand out. The president talks of a France that encourages wealth creation rather than envy of the rich. Scrapping the wealth tax, introduced in 1982 and in force (mostly) since then, is bold. It is partly replaced by a levy on pricey properties. Revenues will drop from a modest €5bn in 2016 to just €1.8bn next year. The benefit should be that fewer wealth-creators will emigrate (by one estimate, France has seen a net loss of 60,000 millionaires since 2000). More might invest in France, perhaps in tech startups. But Mr Macron has been dubbed “president of the rich”.
The second notable measure is to keep the projected budget deficit below 3% of GDP, as required under EU law. It is likely to be 2.9% in 2018. This is a matter of totemic importance to Mr Macron. He wants to be the first French leader in a decade to get it below 3%.