France’s Left Says Vast Tax-and-Spend Plan Will Repair Finances

William Horobin
·3 min read
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(Bloomberg) -- France’s leftist alliance unveiled plans to address the country’s economic challenges with a vast increase in taxation and public spending, and reaffirmed it would abolish several of Emmanuel Macron’s pro-business reforms.

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By 2027, when the president’s mandate ends, the New Popular Front is budgeting €90 billion ($96.2 billion) annually to boost purchasing power, €30 billion to protect the environment, and a further €30 billion to repair public services — totaling roughly 5.4% of last year’s gross domestic product. That would be matched by extra revenue including from levies on multinationals and financial transactions, it said.

“The Macron era is over,” Socialist Party Senator Alexandre Ouizille told a news conference on Friday. “In a few days, there’ll be nothing left of it.”

The French business community has criticized the economic programs of the left-wing alliance, raising concerns about its plans to hike the minimum wage, reinstate taxes on the wealthy and capital, and reverse Macron’s pension reform.

Investors are having to reckon with the possibility of a seismic shift in French fiscal and economic policy after Macron called snap legislative elections. The current government planned sharp spending cuts to bring France’s deficit back under 3% of economic output by 2027.

Marine Le Pen’s far-right National Rally, which is leading in the polls, has sought to water down its proposals amid a business backlash, saying more costly measures would be delayed, maybe indefinitely, depending on an audit of public finances. It has not presented forecasts for a budget. The left, however, is powering ahead with its plans for massive spending.

In a post on X on Friday, former International Monetary Fund Chief Economist Olivier Blanchard said the left’s program is worse than that of the National Rally.

“As an economist and someone sometimes involved in policy design, I also know there is a delicate balance between reducing inequality and maintaining strong growth,” he said. The new left program “simply ignores this balance, and can only, like many of its predecessors, lead to an economic catastrophe.”

Last week saw investors react to Macron’s decision by dumping French assets amid concerns about who might lead the next government. They have steadied in recent days, though bond investors are set to demand an extra premium relative to German securities for years.

The New Popular Front, which brings together the Socialists, Communists, Greens and the far-left France Unbowed, said it would take measures this year at an extra cost of €25 billion that would be more than covered through €30 billion in revenue from a levy on company superprofits and reinstating wealth taxes.

Eric Coquerel, of France Unbowed, who presided the finance committee at the National Assembly before the dissolution of the lower house on June 9, said all new spending would be funded by tax increases. In the longer run, he said a boost to economic activitiy from extra spending would help improve finances.

“Our plan isn’t to finance this program by increasing the deficit,” he said. “We even think we could do better than the current government.”

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