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Economic policy

Published on April 13, 2015
Interview given by M. Michel Sapin, Minister of Finance and Public Accounts, to the daily newspaper Les Echos (excerpts)
Paris, April 9, 2015

Q. – How will the measure on investment be funded?

THE MINISTER – In 2015, the cost of the measure is being funded by savings. For 2016 and 2017, it should continue being part of the coherent framework of our fiscal trajectory and the Responsibility Pact. To stimulate investment, you need confidence, which means staying on course but also putting your foot on the accelerator.

Q. – Does it follow that this tax bonus will replace the corporation tax reduction set out in the pact?

THE MINISTER – This measure won’t prevent us from reducing the corporation tax rate too, as has been announced. We’re on course to reduce the corporation tax rate.

Q. – What impact do you expect on investment and growth?

THE MINISTER – The stability programme I’ll be presenting at the Council of Ministers’ meeting on 15 April is based on a swift and powerful recovery of businesses’ margins and on a marked pick-up in investment in 2016. Our macroeconomic scenario seeks to be cautious and realistic: we’re maintaining our growth forecast at 1% this year and we then anticipate 1.5% in 2016, then 2017. This caution is a deliberate choice aimed at restoring France’s full credibility. Our growth forecasts must now be regarded as minimum targets and not ceilings, although we may subsequently have good news.

Q. – Is this consistent with a fall in unemployment?

THE MINISTER – If the predicted growth is realized, the economy should create a significant number of jobs again from 2016 onwards. It follows that, after stabilization at the end of 2015, unemployment should fall in 2016 and 2017.

Q. – Will the tax burden decrease?

THE MINISTER – After a marked increase from 2011 to 2013, the rate of obligatory tax and social security deductions stabilized in 2014. We’ve now entered a period of tax reductions, with the measures in the Responsibility Pact for businesses and low-income households. In September, nine million households will have seen their taxes fall. From 44.7% of GDP last year, the rate of obligatory tax and social security deductions will fall again to 44.2% in 2017.

Q. – Will there be new tax reductions for households or businesses in addition to what’s already been announced?

THE MINISTER – The priority is still to implement the Responsibility and Solidarity Pact, with the tax and cost reductions planned.

Q. – Even if there’s surplus growth?

THE MINISTER – Surplus growth should firstly enable us to speed up the decline in unemployment, in the knowledge that, if there are additional receipts, they’ll have to go primarily to reducing our deficits more quickly.

Q. – Do your new deficit forecasts comply with the European Commission’s recommendations?

THE MINISTER – Given that the deficit in 2014 was lower than expected, we’ve revised our forecast for 2015, with a deficit of 3.8% of GDP. We’re also acting accordingly for 2016 and 2017, with a predicted deficit of 3.3% of GDP in 2016 and 2.7% in 2017. So our trajectory is slightly better than recommended by the European Commission. And we’re going to make the €4 billion in additional savings requested for 2015. That’s the sum that will enable us to stick to our plan for €21 billion in savings and make up for the impact of low inflation, because on this too, we’re being cautious: our scenario is based on inflation levels below the ECB’s forecasts for 2015, 2016 and 2017. (…)./.

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