France wrestles with deficit

Click to follow
The Independent Online
French jitters about imminent government moves to wrestle the public deficit closer to Maastricht targets helped send the Paris Bourse into a tailspin yesterday. On Monday observers expect the socialist coalition to unveil an attack on corporate profits which will put Labour's windfall tax in the shade.

Measures could include hoisting company taxes to as much as 40 per cent, one of the highest rates in the Western world, and increasing employers' pension contributions. However, even though the French corporate world may squeal, analysts will remain sanguine as long as the results of the "audit" of public finances show the public deficit at no more than 3.7 per cent on current policies.

Although this is well above the 3 per cent deficit target laid down by the Maastricht treaty, the consensus view is that the extra taxes and contributions will slice the eventual overrun to a more respectable 3.3 per cent.

Graham Bishop of Salomon Brothers voiced the view of many experts when he said the bond markets were "relaxed" about the ability of the French to meet such a target this year and 3 per cent next, including the corporate tax adjustments.

Any spanners in the works are likely to be thrown by the Germans, who may get nervous if the audit shows a deficit of 3.8 per cent.

Comments