Socialist Hollande Pledges Tax Breaks End, Eased Pension Measure
Hollande, 57, the frontrunner in the presidential campaign, advocated forcing banks to separate retail and investment operations. He’ll raise levies on the wealthy to finance an expansion of the civil service while respecting budget-cutting commitments. The measures were among 60 in a platform published today.
“We must make an effort for more fairness and to rein in the financial industry,” Hollande said in Paris. “We will separate the speculative sector from the credit sector.”
Hollande’s address in Paris came four days after his first major campaign speech in which he said the finance industry, and not Sarkozy, was his main rival. Europe’s sovereign debt crisis has plunged the region into an economic slump.
Hollande, who advocates the creation of a public European credit-rating company, is also at odds with German Chancellor Angela Merkel on measures to ease the region’s financial crisis. He would expand the euro-area bailout fund and seek a greater role for the European Central Bank. He also aims to overhaul a Dec. 9 accord for greater fiscal integration and will push for jointly sold euro bonds.
The socialist candidate said he would increase spending by 20 billion euros ($26 billion) over a five-year mandate. That would be financed by repealing 29 billion euros of tax breaks, lifting tax receipts to 46.9 percent of gross domestic product in 2017 from 45.1 percent this year.
France’s national statistics office, Insee, says Europe’s second-largest economy may have entered a recession and may see 61,000 job losses in the first half. According to the International Monetary Fund, France’s economy may grow by no more than 0.2 percent this year.
The first round of elections will be April 22, with the top two candidates competing in a decisive contest on May 6. Hollande’s lead over Sarkozy is widening, a CSA poll for free daily 20 minutes, BFM TV and RMC radio newspaper and broadcaster BFM showed today. He has the support of 31 percent in the first round, 6 points ahead of Sarkozy and up from 3 points a month ago, CSA said. His second-round lead is now 20 points, at 60 percent, up from 14 points.
France hasn’t had a Socialist president since Francois Mitterrand’s second term ended in 1995. Hollande won the party’s nomination after Dominique Strauss-Kahn declined to run in the wake of his May 2011 arrest in New York on sexual-assault charges that were subsequently dropped.
Hollande is holding to Sarkozy’s forecasts on growth and the budget deficit, seeing a budget shortfall of 4.5 percent of GDP this year, 3 percent next year and 2.3 percent in 2014. His deficit target is based on estimated expansions of 0.5 percent this year, 1.7 percent for 2013 and 2 percent in 2014.
Hollande promised that those who started work at a young age would be allowed to retire before the new legal minimum age of 62, if they have worked the required 41 years and 6 months. To pay for it, he’ll raise labor taxes for companies and workers by 0.1 percent.
Sarkozy pushed through an increase in the retirement age in 2010 to sustain France’s top credit rating, which was cut by Standard & Poor’s this month.
French bonds fell after Hollande’s remarks, with the 10- year yield rising as much as 5 basis points to 3.15 percent before paring to 3.10 percent.
“The danger is the Socialist program is totally focused on tax increases and no courageous decisions for France,” Jean- Francois Cope, head of Sarkozy’s Union for a Popular Movement party, said in an interview in Davos, Switzerland, today. “We have to keep going with structural reforms.”
Like Sarkozy, Hollande wants to expand tax breaks for companies spending on research and development, state-directed investments in industry and a tax on financial transactions. Both politicians have pledged to cut deficits and balance the budget by late 2017 or early 2018. France’s deficit was about 5.5 percent of gross domestic product in 2011.
France’s top financial regulator said today in a conference in Paris that a tax on financial transactions, which is also advocated Sarkozy, would weaken the country’s position in the asset-management industry.
“Markets may sanction the lack of structural reform,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas. (BNP) “The program has investment aspects but does not tackle the cost competitiveness dimension of French industry.”
Sarkozy, who has yet to declare his intention to seek a second term, plans to unveil an economic plan on Jan. 29. The president last week presented 430 million euros of measures to promote job creation and said he’ll make more structural proposals during his televised program.
Hollande and Sarkozy differ on issues such as energy, immigration, wealth tax and the pension regime. Hollande wants to cut the share of nuclear power in France’s energy supply to 50 percent in 2025 from about 75 percent now, a measure Sarkozy says will raise electricity prices and cost thousands of jobs.
Hollande would undo a government measure of not replacing one in two retiring civil servants while promising not to increase the number of public workers.
“All the presented measures will fully funded for the recovery of public finances. I promise only what I can do no more no less,” he said in today’s press conference.
He said he’ll bring home French troops from Afghanistan by the end of the year. Sarkozy has said he will stick to the NATO timetable of a 2014 pullout.
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