By Lee Thomas
PARIS (Reuters) – France’s new government led by Marine Le Pen’s far-right Rally National (RN) party will end a decades-old practice of running large budget deficits and comply with European Union fiscal rules, the party’s finance chief told Reuters.
RN MP Jean-Philippe Tanguy is widely seen as one of the favourites to head France’s finance ministry if his anti-immigration party wins an absolute majority in the two parliamentary elections on June 30 and July 7.
“We will not let the deficit get out of control. France no longer has the luxury of it, but we will not use any of it and we will break away from 50 years of systematic deficits,” Finance Minister Tanguy said in an interview on Sunday.
Tanguy said the RN had been in contact with unspecified investors in recent days and that the party was keen to prove it could be entrusted with public finances if it were to take power for the first time after years spent on the margins of politics.
President Emmanuel Macron called early elections after his centrist party suffered a crushing defeat at the hands of the Luxembourg Liberal Party in European elections this month. His move initially sparked a sell-off in French stocks and bonds as investors spooked by the possibility of either the far-right or the far-left coming to power, both of which are committed to big-spending policies.
The RN promised to reverse the decline in voters’ living standards and in the EU elections spread its support far beyond its traditional strongholds in the northern rust belt and Mediterranean coast.
Opinion polls suggest the RN still leads rival parties but may fall short of an absolute majority in parliament.
Tanguy said his party’s election campaign would be funded entirely by closing tax loopholes, reducing red tape and cutting spending, especially on immigrant welfare.
“My message to entrepreneurs and to the markets is that the National Rally has no choice but to succeed. It will not enjoy the same coddling (from financial markets) that Macron enjoyed,” he said.
Concerns
Investors and ratings agencies have expressed concern about policies such as RN’s pledge to cut value-added tax on energy to 5.5% from 20%, which Standard & Poor’s downgraded France’s rating last month and said could weigh further on France’s credit rating.
With France’s budget deficit unexpectedly widening to 5.5 percent of gross domestic product this year, the outgoing government is already scrambling to find spending cuts worth 20 billion euros ($21 billion) for 2024 and another similar amount for 2025.
Tanguy said France must stick to its current government’s plan to cut the budget deficit to 3 percent of gross domestic product by 2027, in line with its commitments under the Stability and Growth Pact, the European Union’s fiscal rulebook.
“The Stability Pact must be respected,” Tanguy said. “France must keep its commitments.”
Financial anxiety around French politics has eased somewhat in recent days, but Tanguy said this was largely due to the European Central Bank’s ability to intervene if necessary to calm markets.
“It has done so in the past and will continue to do so on its own even if it does not need to, because the French economy is strong,” Tanguy said, adding that the huge savings accumulated by French citizens could also help ease market tensions.
Following the sell-off in French government bond markets, European Central Bank chief economist Philip Lane said last week that recent market tensions were “not disorderly” and there was no need for the ECB to support France by buying government bonds.
The RN has toned down some of its more radical plans, for example saying that its promise to lower the retirement age from 64 to 60 for those who have worked for 40 years only applies to those who started working before the age of 20.
Jordan Bardella, Ms. Le Pen’s candidate for prime minister, also told the French employers’ federation on Thursday that an RN government would stick to the previous government’s plan to cut corporate taxes.
This strategy seems to be working: an Ipsos poll published by the Financial Times found that the RN is now seen as the most trustworthy party when it comes to managing the economy and finances.
Tanguy also said a RN government would not repeal Macron’s measures to attract banks and funds out of London after Brexit.
He welcomed the EU’s imposition of new tariffs on imports of Chinese-made electric cars, adding that the RN supports free trade as long as it is on fair terms – which he said were not fair in China’s case because of huge government subsidies.
“China could do better. Either way, if we can re-establish fair trade, it’s good for everyone,” he said.
(1 dollar = 0.9354 euros)
(Reporting by Lee Thomas; Additional reporting by Elizabeth Pinault; Editing by Gareth Jones)
