Daily Reports
French public finances are under intense scrutiny as early parliamentary elections unfold, with doubts cast on the ability of major parties to reduce the budget deficit. The first round of elections, which began on Sunday, has shown a significant shift in political dynamics, with the far-right National Rally party leading, followed by the left-wing New Popular Front coalition, and President Emmanuel Macron's centrist coalition trailing in third place.
The National Rally party, led by Marine Le Pen, proposes several economic measures including cutting value-added tax on energy sales, linking pensions to inflation, and lowering the retirement age. However, the feasibility of these plans is questioned, especially given the party's reliance on uncertain sources of revenue such as increased taxes on energy producers' exceptional profits.
The New Popular Front coalition, representing the leftist movement, has ambitious plans to increase public spending, raise civil servant salaries, and provide free lunches and transportation for school students. Their strategy involves taxing super profits and reintroducing a wealth tax, but critics argue that these measures may not be sufficient to cover the extensive spending plans, which also include freezing basic food and energy prices and raising the minimum wage.
President Macron's coalition aims to reduce the budget deficit to 3% of GDP by 2027, a target that seems increasingly out of reach. The party's pledges include reducing electricity bills, raising pensions, and increasing public sector wages, yet they remain committed to not significantly raising taxes, raising concerns about the sustainability of their fiscal policies.
The election results have broader implications for Europe, particularly if the National Rally secures a majority. The party's Eurosceptic stance and desire to curb EU influence could disrupt longstanding Franco-German cooperation and EU projects. The political landscape in France is poised for potential stagnation, with no single party likely to achieve an absolute majority, leading to tough coalition negotiations and possible governmental instability.
- The National Rally's proposed economic measures include significant tax cuts and social benefits, but their funding sources are questionable. The party plans to finance these cuts by reallocating funds from France's EU contributions and taxing energy producers' exceptional profits, but these sources may not be reliable in the long term.
- The New Popular Front's extensive public spending plans aim to address social inequalities and economic challenges, but their approach to funding these initiatives through increased taxation and closing tax loopholes faces skepticism. The coalition's rejection of EU financial rules adds to concerns about their fiscal responsibility.
- Macron's centrist coalition faces a challenging path to achieving its budget deficit reduction goals. Their commitment to not raising taxes significantly while promising various social benefits raises questions about the feasibility of their fiscal strategy, especially in a politically fragmented parliament.
- The broader European implications of the French elections are significant. A National Rally majority could lead to a shift in France's stance on EU cooperation and NATO, potentially affecting the stability and direction of European projects. The uncertain political landscape in France may also lead to a period of administrative stagnation, impacting France's role as a key player in Europe.
