France: PM Valls faces intraparty opposition after announcing reform package
April 23, 2014
Tensions within the governing French Socialist Party (PS) are growing as the May European elections approach. On 21 April, several members of the incumbent French Socialist Party (PS) asked party-member Prime Minister Manuel Valls to reconsider the scope and size of the austerity package he intends to implement. The group of deputies argued that the austerity measures that Valls announced on 16 April will weigh too heavily on citizens earning the lowest salaries and will threaten both economic recovery and job creation.
President FranÃ§ois Hollande appointed Manuel Valls-former Minister of Internal Affairs-as PM on 31 March in the aftermath the PS's hefty defeat in the March local elections. By appointing Valls, Hollande intended to contrast the increasing popularity of the two main opposition parties: the Union for a Popular Movement (UMP), which won the local elections on a platform focused on reducing spending, and the far-right National Front (FN), which surprisingly came in third in local elections running on a populist campaign against the PS's immigration and labor policies. Valls recently announced his intention to cut public spending. He also gained a reputation of being a hawk on immigration when he advocated for deporting the Roma immigrant community during his tenure as Minister of Internal Affairs.
Valls' main set of reforms are focused on cutting taxes on wages in order to reinvigorate business investment and to promote hiring. Valls also announced a 100% tax cut for employers that hire people at minimum wage, which he hopes will encourage businesses to employ more workers from the most vulnerable segment of society. Finally, he proposed a reduction in corporate tax. France has Europe's highest corporate tax at 37.0%, which Valls plans to reduce to 27.0%. The reduction, however, will not take place until 2020. Public spending will be cut by EUR 50 billion in order to offset the cost of this stimulus. As a result, civil servants' salaries and pensions-except those of people in the lowest income bracket-will be frozen until October 2015 at the earliest. Valls also plans to withdraw EUR 10 billion from social protection to help pay for the tax reduction. This is one of the primary reasons that he was met with strong opposition within the PS and in the other members of the governing coalition.
Following a 22 April meeting, the PS members who had questioned the government's new economic plan said that they now agree with the size of the austerity plan. Nevertheless, Valls left the door open to discuss the issue with the rest of the coalition so they can reconsider the impact the measures would have on the country's lowest earners. The National Assembly will vote on a final version of the measures on 29 April.