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
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
Life and Style
tech
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Catherine (Sarah Lancashire) in Happy Valley ((C) Red Productions/Ben Blackall)
TV
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
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

Recruitment Genius: Maintenance Assistant

£25000 - £30000 per annum: Recruitment Genius: A Maintenance Assistant is requ...

Recruitment Genius: Business Manager

£32000 - £40000 per annum: Recruitment Genius: A Business Manager is required ...

Recruitment Genius: Operations Manager

£45000 - £55000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Panel & Cabinet Wireman

£20000 per annum: Recruitment Genius: Panel Wireman required for small electro...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?