France turns in its tax cuts and unprecedented pandemic spending

Olivier Dussopt attends a news conference in Paris, France on September 22 to present the French Budget 2022 at Bercy Finance Minister in Paris, France. PARIS - Sept 22 reuters - Emmanuel Macron's government turned in its tax cuts and unprecedented pandemic spending on Wednesday as it defended its budget for 2022, a presidential election year.

Seven months before the vote, right-wing candidates have already attacked the government over the 130 billion euros $152.5 billion - nearly 6% of the GDP - spent since the COVID-19 crisis erupted to keep households afloat.

Minister of Finance Bruno Le Maire said the spending had hold the euro zone's second largest economy back from the brink, as COVID restrictions stunted activity worldwide.

We spent the money making sure it went to good use, Le Maire told reporters as he presented his budget for 2022. We manage the budget seriously and responsibly, we are attached to keeping the public finances under control. In addition to the stimulus used by 70 billion euros, the government forecasts that the 2.3 trillion euro economy will grow 6% this year as it recover from the crisis before slowing to 4% in 2022.

With the French economy rebuilding stronger than initially seen, the Government has already trimmed its budget deficit projections for 2021 and 2022.

Despite the extraordinary strain on public finances, Le Maire says the government would nevertheless have delivered 50 billion euros in tax cuts to households and businesses over the course of Macron's five-year term.

It now expects the public sector budget shortfall to drop from an estimated 8.4% of gross domestic product this year to 4.8% next year as the economy puts the coronavirus crisis behind it and support measures are withdrawn.

An independent budget oversight panel said the government may be overestimating the deficit as a strong job market rebound should result in better than expected tax income. With France's country fiscal debt burden expected to reach 116% of GDP this year, the panel urged the government to use any financial windfall to reduce debt, spurning the temptation to increase spending heading into an election year.

Le Maire said 8 billion euros which had originally been used for implementing crisis support measures in 2021, but were now no longer needed, would be used mostly to reduce deficit.

However, 600 million euros will go to increasing subsidised energy vouchers by 100 euro to help poor households cope with rising prices over the winter.

In the next few weeks, extra budget for a long-term public investment programme and an income support plan to help young jobseekers would be added to the budget as it passed parliament, Le Maire said.