President Emmanuel Macron asked from local authorities on Monday to cut spending by €13bn euros over the next five years, AFP and RfI report.
The shock announcement came from Public Accounts Minister Gérard Darmanin in a meeting with local council representatives. That is €3bn more than the President pledged during his campaign. Cuts will come hand-in-hand with shedding 70,000 jobs in local government, RfI reports.
Local government cuts make part of an overall five year plan to deliver €64.5 bn in “fiscal consolidation” measure, bringing France in line with the 3% budget deficit rules. The IMF has hailed Macron’s austerity programme, which “go a long way in addressing […] longstanding economic challenges.”
But, this is not the only challenge for French local authorities. Looking to address the budget deficit and reduce the overall tax burden, Macron is also asking for a reduction in local government tax for house ownership for 80% of house owners. The tax is paid by 27 million French and is based on residence, irrespectively of income.
The tax brings in €22bn. Scrapping it will create an estimated €8,5bn black hole in local government spending, before affecting spending cuts.
The Republican head of the French mayor’s association, François Baroin, recalled on Monday that local authorities are already responsible for 34% of France fiscal consolidation measures over the last three years, France24 reports.
Prime Minister Edouard Philippe has promised “consultation” with local authorities but left little room for a change in policy. The government suggests that it may ease the pressure on local authorities by increasing local authorities share from the national social security tax levied on income.
Paradoxically, these cuts come with a promise for governance “decentralization.”