Tuesday, June 6

France announces €45bn effort to shield country from energy cost increases | France

The French government plans to spend €45bn shielding households and businesses from energy price shocks in a budget focussed on bringing down inflation.

The finance minister, Bruno Le Maire, said the increase in the cost of gas and electricity would be capped at 15% from January. Gas and electricity price rises are currently capped at 4% until the end of the year in what is known as the bouclier tariff (tariff shield).

Outlining key elements of his 2023 budget bill on Monday, Le Maire said it was financed “down to the last euro” and the government’s No 1 priority was fighting inflation at a time of unprecedented uncertainty due to Russia’s war against Ukraine.

“The most important and the most urgent challenge for France and other European nations is to bring down the inflation pressure,” the minister told journalists on Monday. “We don’t want to increase taxes and we want to protect households,” he added.

Special levies on energy companies were expected to reduce the net cost to the country of the price cap from €45bn to €12bn. Le Maire said €3bn would be set aside to help French companies threatened by soaring energy prices particularly those “exposed to international competition”.

The French state is the majority shareholder in EDF the country’s largest electricity supplier – it is currently engaged in taking full control of the company – and owns Gaz de France (Engie).

In an interview with Le Journal du Dimanche, the public accounts minister, Gabriel Attal, said the fuel price cap would “block the rise in gas and electricity bills at 15% instead of 120%”. Without this year’s 4% price cap, based on prices in November 2021 – three months before Russia’s invasion of Ukraine – the ministry estimated French bills would have risen 60% for gas and 45% for electricity.

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“The budget we are presenting is [a] budget to protect,” Attal said.

Income tax bands were also being increased next year by 5% to partially mitigate the effects of inflation, meaning someone earning €2,000 a month would be €200 better off, Attal added. The top tax bracket for anyone earning more than €169,000 will remain at 45%.

Le Maire also announced pay increases for teachers as well as 10,000 new civil service jobs, including 2,000 new teachers, and the financing of 6,000 homes for refugees and asylum seekers.

He said inflation was expected to remain at about 6% in the coming months before dropping to 4% in 2023. The government’s second priority was to maintain public spending to within 5% of the country’s output with the aim of reducing it to the EU’s limit of 3% of GDP by 2027, and to reduce the public debt – expected to rise to a record €270bn next year – from 2026, Le Maire added.

Economic forecasts from earlier this month suggest growth in France’s economy will drop to 1% next year from 2.7% this year. However, the high council for public finance, an independent body, has said the government’s growth forecasts are optimistic.

The government must now push the budget through a fractious parliament having lost its majority in the Assemblée Nationale in legislative elections before the summer.


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