Crisis: Sarkozy; VAT and Tobin Tax, shock to growth

'Financial world made a mistake, must do its part'

30 January, 11:33

French President Sarkozy live on eight TV stations announces his recipe for growth recovery French President Sarkozy live on eight TV stations announces his recipe for growth recovery

(ANSAmed) - PARIS - An increase in VAT, the Tobin Tax, the Bank of Industry, binding apprenticeship contracts for the manufacturing sector and stimulus for residential zoning: the measures announced yesterday evening by the French president Nicolas Sarkozy live on eight TV stations are tough medicine, a recipe ''for growth recovery''. He held an hour-long speech in which he mentioned the German model as least ten times, almost an obsession for him, and did not announce his candidature but did hint clearly at it at the end of the broadcast in responding to journalists' questions, saying ''I know that I have an appointment with the French people, and I will not pull back.'' Sarkozy's plan, a number of parts of which had been announced over previous days, should make it possible for the structures of the French social state to bear up against that ''tempest'', as Sarkozy called it, even though in replying to the first question of the four questions who questioned him he seemed optimistic: ''Europe is no longer on the edge of the abyss. The financial situation shows elements of stability.'' The latter is due to the work by Paris and its policies, as well as those of other countries like Italy (''Mario Monti has taken strong and fair steps'') and Spain. And so the fiscal arsenal that the French will be dealing with over the coming months has been made official. Almost all of the measures will come into force after the summer and just after the presidential elections. VAT will rise by 1.6 points, from the current 19.6 to 21.2%, a record high for France. This measure, said Sarkozy, will bring into state coffers ''13 billion euros'', and will not affect the easier terms enjoyed by those paying reduced-rate VAT (such as restaurants). There will be a reduction in business taxes for family cheques, which will lighten production costs and foster French industrial competition. In order to make up for losses, the president has announced an increase in the CSG, the tax affecting unearned income, which will bring in 15 billion euros for the state. And finally, a Bank of Industry will be created, which ''will loan funds for the real economy'', in contrast with the virtual one of finance, and will have at is disposal ''up to a billion euros''. Sarkozy also announced special measures for housing, lamenting the fact that only in France - in a period of crisis - are rent and real estate costs not dropping: and so residential zoning permits will be increased by 30% for land, houses and real estate. For employment, there will be drastic and more severe penalties for enterprises which do not comply with the obligation to have among its employees 5% of apprenticeship contracts, while the French version of the famous Tobin Tax - which over the past few months Sarkozy had attempted in vain to get his European partners involved in - will come in during the month of August, with 0.1% on stocks traded on the stock exchange.

These measures which Sarkozy found himself having to announce on the eve of the European Council meeting and only 80 days before the country's elections had been announced as ''shock measures''. ''Many advisors,'' Sarkozy said, ''had told me not to explain these things on television. I am instead convinced that the French must be aware of how the situation stands.'' Between the lines, every one of the president's statements concealed his impatience to officially announce his candidature, starting from the stabs at ''unregulated'' finance, which behaved ''in such a foolish way over the past three years, and so it is only logical that it should now contribute to reducing the deficit.'' Sarkozy seemed extremely concentrated and never arrogant or annoyed by journalists (which in other speeches he has been). He showed a sort of ''obsession'' with Germany, praising its level of industrialization, GDP and monthly hours worked compared with the French. Only at the end - faced with pressing queries on the election campaign - was he unable to do otherwise than half-admit that ''I know I have an appointment with the French. And I will not pull back.''(ANSAmed).

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