French PM warns of France’s ‘addiction to public spending’

Prime Minister Édouard Philippe told lawmakers that it was time to end France’s addiction to public spending and rein in debts that had reached "an unbearable level", putting the country "at the mercy of financial markets".

Philippe side-stepped the notion of one-size-fits-all austerity, instead insisting that the plan of the new centrist President, Emmanuel Macron, was to reduce public spending while launching a €50 billion investment programme and cutting a range of taxes, including slashing corporate taxes to boost businesses.

Philippe warned that French public spending and debt had reached unsustainable levels. “We are dancing on a volcano that is rumbling ever louder,” Philippe said. “The French are hooked on public spending. Like all addictions, it doesn’t solve any of the problems it is meant to ease. And like all addictions, it takes will and courage to detox.”

Cutting France’s budget deficit is key to winning the trust of its European Union partner, Germany, and persuading Berlin to embark on reforms of the bloc. France has one of Europe’s highest levels of public spending.

Philippe said public debt totalled €2.1 trillion, nearly the equivalent of a year’s economic output, which left the country vulnerable to speculation. He said the government aimed to bring France’s deficit within the EU limit of 3% of GDP this year.

Philippe said 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.

Philippe reiterated Macron’s campaign promises, including the loosening of labour laws to “free up” business. But the timescale for some flagship tax cuts – such as reducing housing tax – could be pushed back, coming into effect between now and 2022.

The rightwing opposition party, Les Républicains, which during the election campaign had argued that France had not balanced a budget for 40 years, said the proposed spending cuts did not go far enough and there was insufficient detail on how to finance the new spending.

The leftist Jean-Luc Mélenchon denounced what he called a free-market dismantling of the state.