Sarkozy pledges to slash France’s spending

Nicolas Sarkozy, campaigning for a second term as France’s president, has promised to cut public spending and increase taxes to set his indebted country on a more balanced path.

Sarkozy’s critics said the pledge, made on Thursday, would unfairly hurt the poor and said he was partly to blame for the high deficit and debt he is now trying to cut.

Analysts said it was unclear whether Sarkozy’s promises would be enough to reassure investors who worry that France’s economic model is unsustainable.

Sarkozy, a conservative who polls suggest would be neck and neck with Socialist candidate Francois Hollande in the first round, said balancing the budget by 2016 was “an absolute imperative”.

Sarkozy said he would balance the budget by cutting $52bn in public spending and raising $17.6bn in new taxes.

His campaign promises so far add up to $11.7bn, according to a campaign manifesto released on Thursday.

Although he promised a balanced budget law this summer, Sarkozy has to win a second term first in elections on April 22 and May 6, but polls suggest Hollande would win convincingly in a runoff.

Sarkozy came to office in 2007, pledging to slash France’s costly social protections to make the economy more globally competitive.

But the 2008-9 global financial crisis curtailed the campaign’s momentum along with the ensuing European debt crisis, and now, with just 17 days left before the elections, the president is trying to revive it.

Frustration with banks

“We can no longer put off the choice of evolution of the nation,” he said Thursday.

But his new pledges take into account public frustration with banks, high executive pay, and market players blamed for exacerbating France’s financial problems.

Extra government income will come from ending tax breaks and loopholes, raising taxes on dividends, a special minimum tax on big companies – and a special tax on people who flee France to avoid high taxes.

“We have to liberate the economy from the tyranny of the short-term and speculative finance,” Sarkozy said.

He criticised Hollande’s campaign pledges as a “festival of new spending” and warned that would dig France deeper in the economic hole.

Sarkozy issued a 30-page letter to voters with 32 propositions “for a Strong France”, his campaign slogan.

The slogan and the letter stress security, an area where Sarkozy is seen as strong. During this campaign, however, unemployment and purchasing power are voters’ much bigger concerns, and many voters feel Sarkozy’s first term
has been too friendly to the rich and too hard on the poor and middle class.

France saw its borrowing costs rise slightly on Thursday when it sold $11bn in a long-term bond auction.

Concerns about France’s economy became more acute when Standard & Poor’s stripped it of its AAA-rating earlier this year.

The impact of the downgrade, which was largely expected, has been limited. But a poor Spanish debt auction
on Wednesday renewed worries that European economies were not growing fast enough to keep their deficits in check.