Economic jolts cut short Hollande's honeymoon

World Focus: Pledge to avoid higher taxes may be broken following collapse of domestic car market

Paris

The tough economic and financial choices are beginning to erode the popularity of President François Hollande as he wrestles with the conflict between campaign promises and reality.

The President and his Prime Minister, Jean-Marc Ayrault, face anger and jibes from the centre-right and the hard left as they try to square the circle of deficit reduction, economic growth and respect for European Union commitments. According to one poll, Mr Hollande's approval rating sank by five points this month to 53 per cent – a time when newly elected French presidents are still traditionally enjoying a honeymoon with public opinion.

Mr Hollande faces a variety of problems before the traditional political "truce" in August. Peugeot-Citroen has announced 8,000 job cuts; emergency legislation to increase taxation on the wealthy has proved more troublesome than expected; and the President's pledge to implement the EU treaty on fiscal discipline without changing the constitution has stumbled into a legal and political minefield.

The new government faces further tough choices in September when it will have to explain how it intends to cut spending to meet the EU target of a 3 per cent of GDP budget deficit next year. The crisis at Peugeot-Citroen is Mr Hollande's most challenging test so far. The firm says it is paying the price for maintaining most of its production in France. Its sales, traditionally dependent on the domestic market and southern Europe, have collapsed.

But the President said the cuts are "unacceptable" and must be "renegotiated". His "minister for productive recovery", Arnaud de Montebourg, has accused the firm of getting its strategy wrong and paying excessive dividends to investors, including the Peugeot family. He is expected to produce a car-industry recovery plan in coming days, including measures to persuade consumers to buy new, ecologically friendly cars.

The crisis has forced many figures on the French left to face a fact that they previously denied or minimised. High social charges on employers means it costs an average of €35 (£27) an hour to employ a car worker in France, compared with €10 in Eastern Europe.

The government is therefore considering a U-turn on its campaign pledge to avoid increasing taxes on the working and middle classes. The "CSG", an extra form of income tax that pays part of the cost of the welfare state, may be increased to reduce the burden on industry. The government confirmed yesterday that it was "reflecting intellectually" on this possibility.

Emergency legislation has been pushed through parliament to more than reverse former President Nicolas Sarkozy's tax breaks for the wealthy.

Legislation has also been introduced to fulfil Mr Hollande's campaign promise to increase income tax, temporarily, to 75 per cent on income over €1m. Some aspects of this legislation face a constitutional challenge on the grounds that it goes beyond taxation and amounts to "confiscation".

Taxman nets €65m from 'Ibra' deal

The transfer to Paris St Germain this week of the Swedish star striker Zlatan Ibrahimovic will be a high-scoring boost to French state finances.

To lure "Ibra" away from AC Milan, PSG's Qatari owners have promised him a salary after tax of €15m a year. President François Hollande's new 75 per cent tax on income over €1m means that the striker's pre-tax pay will be around €57m.

Bonuses and social charges of gross salary could, it is estimated, take the total annual cost of employing Ibrahimovic to €80m – of which €65m will go to the French taxman.

John Lichfield

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior Accounts Assistant - Accounts Payable - St. Albans

£26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Installation and Service / Security Engineer

£22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

Recruitment Genius: Service Charge Accounts Assistant

£16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions