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2012 budget

Published on September 30, 2011
Excerpt from the communiqué issued following the Council of Ministers’ meeting

Paris, September 28, 2011

2012 budget

The Minister for the Budget, Public Accounts and Administrative Reform and Government Spokesman, together with the Minister for Economy, Finance and Industry, presented the 2012 budget.

Reducing the public debt is a priority. It requires, first of all, a reduction in the public deficit. In this respect, the budget for 2012 confirms the inexorable nature of the pluriannual return to stability in the public finances. The public deficit will be brought down from 5.7% in 2011 to 4.5% in 2012, 3% in 2013, 2% in 2014 and then 1% in 2015. France will begin her debt reduction as early as 2013: the ratio of debt to GDP will decline from 87.4% in 2012 to 87.3% in 2013.
For 2012, the government has opted for a growth forecast of 1.75% – identical to that of 2011. This choice reflects a concern for prudence, in an economic context that is less favourable than before the summer. Despite solid economic fundamentals, France is actually feeling the effects of the slowdown in global growth, the uncertainties hanging over certain Euro Area countries and the turmoil affecting the financial markets since August. However, the government notes that domestic demand remained robust over the summer, as did industrial production figures (+1.5% in July). So we should not overreact to market fluctuations.

France is excellently placed to resume a stronger growth trend: French households have little debt; their level of savings is still high; more moderate inflation in 2012, combined with rising salaries, will enable their spending power to increase; and the major structural reforms undertaken by the government since 2007 (revenu de Solidarité active [inclusion income support, comparable to Working Tax Credit in the UK and Earned Income Tax Credit in the US], university reform, Crédit Impôt Recherche [R&D tax credit], future investment, pensions reform etc) are gradually increasing our economy’s potential growth. (…)

The unprecedented effort to control state spending has been made possible by the result of the reforms carried out since 2007 in the framework of the Révision générale des politiques publiques [overhaul of government policies], particularly the non-replacement of one in two civil servants who retire. In 2012, this policy will continue through the elimination of 30,400 posts in the civil service.

In total, for the first time since 1945, ministries’ budgets and wage bills, excluding pensions, are falling. Despite this historic decline, however, the government’s priorities remain: research and higher education, our social policy commitments and the primordial duties of the state. (…)

The budget comprises several new fiscal measures reflecting three principles: fairness, in particular through the introduction of a special tax on very high earners, which will apply until the public deficit gets back below 3%; a reduction in tax breaks, through an additional 10% cut in income tax relief and the streamlining of certain incentives for buy-to-rent investment and improved energy efficiency; and the development of taxation aimed at influencing behaviour (a levy on drinks with added sugar, and a tax on excessive rents). (…)./.

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