French PM: addiction to public spending must end

French Prime Minister Edouard Philippe told lawmakers Tuesday that France must introduce wholesale reforms if the country is to regain its economic health.

That means the country must end its addiction to public spending, slash corporate taxes, rein in its debt, reduce its deficit and invest in the future, he said, emphasizing that the country's growing debt is unsustainable.

"We are dancing on a volcano that is rumbling ever louder," Philippe told the newly elected National Assembly, adding that under his plan public deficit would be brought below 3.0 percent of GDP this year.

"France cannot remain the champion both of public spending and taxes," he added.

Confidence vote won

After Philippe had set out his plans, the National Assembly held a vote of confidence, which the government comfortably won. The lower house, which is dominated by President Emmanuel Macron's Republic on the Move party (LREM), voted in favor 370 votes to 67, with 129 abstentions.

Getting France's chronic overspending will be a priority, Philippe said, warning that the public debt now totaled 2.1 trillion euros, nearly the equivalent of an entire year's economic output.

Under his plan, the reduced spending will be accompanied by a substantial cut in corporate taxes. The 33.3 percent rate will be slashed to 25 percent by 2022.

"Businesses must want to set up and develop on our territory rather than elsewhere," Philippe told parliament. He added that the corporate tax cut would bring France "in line with the European average."

Pumping up the economy

Philippe also announced "a grand investment plan" worth 50 billion euros ($56.7 billion). Stressing the importance of "investing in the sectors of the future," Philippe told lawmakers that environment, health, agriculture and transport would be the biggest beneficiaries of the investment plan.

Philippe's address to parliament came one day after the newly elected reformist President Emmanuel Macron addressed legislators at the Palace of Versailles. Among other reforms the 39-year-old president - and youngest French leader since Napoleon - vowed to cut the 925-member, bicameral, legislature by a third.

'Hooked on public spending'

Pumping new life into the country's ailing economy is at the heart of Macron's reform agenda. France's independent auditor recently announced that this year's budget shortfall tops 8 billion euros. Once again, that puts it over the European Union's cap of 3 percent of national income.

"The French are hooked on public spending," Philippe told the National Assembly to applause. "Like all addictions it doesn't solve any of the problems it is meant to ease. And like all addictions it requires willing and courage to detox."

Philippe noted that for every 100 euros Germany raised in taxes it spent 98 euros, while France spent 125 euros for every 117 euros levied in taxes.

He said, "Who really believes this situation is sustainable?"

bik/se (Reuters, AFP)