Sarkozy unveils plan to kickstart economy

8th June 2007, Comments 0 comments

PARIS, June 8, 2007 (AFP) - French President Nicolas Sarkozy's government on Thursday unveiled details of an 11-billion-euro (15-billion-dollar) masterplan to "shock" the economy back to life, the first part of his ambitious economic and social reform drive.

PARIS, June 8, 2007 (AFP) - French President Nicolas Sarkozy's government on Thursday unveiled details of an 11-billion-euro (15-billion-dollar) masterplan to "shock" the economy back to life, the first part of his ambitious economic and social reform drive.

The eight-chapter tax and finance bill seeks to exempt overtime work from taxation; make mortgage interest payments tax deductible; all but eliminate inheritance tax; and put a 50-percent cap on overall individual taxation.

It will be debated by the new parliament after this month's legislative election.

Prime Minister Francois Fillon outlined the total cost of the plan in an interview with the Parisien newspaper.

He said the outlay would be "between five and six billion for overtime, three billion for housing and 1.7 billion property succession rights."

Fillon added that a 50-percent cap on income taxes, down from 60 percent, would not prove a drain on state coffers because, "if it works, it will reduce the capital flow" out of the country.

"Our aim is to provoke a shock to spur confidence and growth," he said.

By enabling people "to work more to earn more," Sarkozy's plan aims to drive up consumer spending, boost economic growth and make it possible to slash France's 8.2 percent jobless rate, among the highest in the 13-nation eurozone.

But that strategy, which the economy ministry said would cost up to 11 billion euros (15 billion dollars) worries the European Union, which wants France to rein in its huge public deficit.

The key plank in the new bill is the proposal to exempt overtime work from taxes and social security charges, which are seen by many employers as a crippling disincentive to hire.

That would undermine the popular 35-hour work week introduced by a previous Socialist government, without taking the radical step of scrapping it entirely.

The bill also proposes tax credits of 20 percent of the interest paid for the first five years of repayments for home loans.

This measure, according to opinion polls, is one of the top topics of conversation among French people at the moment.

Sarkozy also wants to triple the amount of money parents can give tax-free to their children while still alive or when they die as inheritance; and to scrap inheritance tax for surviving partners, thus bringing France in line with most other European countries.

These measures would exonerate nine out of 10 French people from inheritance tax.

It also seeks to tighten the screw on "golden handshake" payouts and stock options for top executives. Severance packages would depend by law on chief executives meeting pre-agreed performance targets.

Sarkozy promised on the campaign stump to outlaw golden parachutes in response to an outcry over a multi-million euro severance payment given to French aerospace executive Noel Forgeard, of Airbus parent company EADS.

The bill drawn up by Prime Minister Francois Fillon and his ministers fleshes out the promises made by Sarkozy that helped get him elected last month.

Although the French economy is riding the wave of a broader European economic upswing, its growth trailed its European partners last year, rising only 2.1 percent compared with 2.6 percent for both Germany and the 13-nation eurozone.


Copyright AFP

Subject: French news

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