French far-right’s finance point man promises fiscal restraint, pro-business stance

By Leigh Thomas
June 24, 2024

A new French government led by Marine Le Pen’s far-right National Rally (RN) would end the decades-long practice of running high budget deficits and stick to the European Union’s fiscal rules, the party’s financial pointman told Reuters.

RN lawmaker Jean-Philippe Tanguy is widely seen as one of the most likely candidates to head France’s finance ministry if his anti-immigration party wins an absolute majority in the two-round parliamentary election on June 30 and July 7.

“We won’t let the deficit run out of control. We won’t use any wiggle room, which France no longer has, and we will break with 50 years of systematically running deficits,” Tanguy said in an interview on Sunday.

Six days from the first round of the election, economists say it is still not clear how much of the far right’s spending plans are funded. President Emmanuel Macron’s centrist alliance has said the RN would explode the deficit and debt.

The RN is keen to demonstrate it can be trusted with the public finances if it takes power for the first time after spending years on the political margins.

Macron called the snap election after his centrist party was trounced by the RN in this month’s vote for the European Parliament. His move initially triggered a heavy selloff of French stocks and bonds as investors took fright at the prospect of either the far right or the far left – both wedded to costly spending policies – taking power.

The RN broadened its support in the EU election far beyond its traditional strongholds in the northern rust-belt and on the Mediterranean coast with promises to reverse the decline in voters’ standards of living.

Opinion polls show the RN still ahead of its rivals but possibly falling short of an absolute parliamentary majority.

Tanguy said his party’s programme would be entirely financed by closing tax loopholes, reducing red tape, and spending cuts, especially on welfare for immigrants.

“We will not have the indulgence (of the financial markets) that Macron enjoyed,” Tanguy said.

EU DEFICIT TARGET

Tanguy said France must retain the current government’s plan to reduce the deficit to 3% of gross domestic product (GDP) by 2027, in line with its commitments under the EU’s fiscal rulebook, the Stability and Growth Pact.

“The Stability Pact has to be respected,” Tanguy said. “France must honour its word.”

Sylvain Bersinger, chief economist at consultancy Asteres, said the welfare cuts, tax loopholes and fight against fraud were unlikely to yield big savings.

Asked if the RN’s pledge to reduce the deficit in line with EU rules was credible, Bersinger said: “I don’t believe it for a second.”

“Even if it seems that the RN is toning down the spending side of its programme, it seems certain that it will increase the deficit, although the exact scale is difficult to put a figure on as it will depend on the precise measures taken.”

Investors and ratings agencies have raised concern about RN policies such as a pledge to cut value-added tax on energy from 20% to 5.5%. Standard & Poor’s said this could weigh further on France’s rating after it downgraded the country last month.

The outgoing government has already sought to find 20 billion euros ($21 billion) worth of spending cuts for 2024 and as much again for 2025 after France’s budget deficit unexpectedly widened to 5.5% of national output this year.

Financial jitters over French politics have eased slightly in recent days, which Tanguy said could be put down partly to the capacity of the European Central Bank to intervene if necessary to calm markets.

“It has done it before and will do it again independently even if not needed because the French economy is solid,” Tanguy said.

The vast pool of savings accumulated by the French people could also help to absorb market tensions, he added.

The RN has toned down some of its more radical plans, for example saying that a promise to reduce the retirement age to 60 from 64 for people having worked 40 years would only apply to those who started work before the age of 20.

The strategy appears to be paying off. In an Ipsos survey, published by the Financial Times, the RN is now seen as the most trustworthy party to manage the economy and public finances.

Tanguy also said an RN government would not scrap Macron’s measures to attract banks and funds from London after Brexit.

He welcomed new EU tariffs on imports of Chinese electric vehicles, adding that the RN backed free trade provided it was on fair terms, which he said was not the case with China because of massive state subsidies.

“Maybe China will behave better. In any case, if we can re-establish fair trade that will be good for everyone,” he said

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