© Reuters. Price tags are seen as a woman shops at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard
By Leigh Thomas
PARIS (Reuters) – French President Emmanuel Macron is banking on a new package of inflation-busting sweeteners for voters to secure a majority in legislative elections this month being fought over households’ squeezed purchasing power.
With rampant inflation driving up the cost of living and eroding wages, Macron is struggling to build on his re-election success, finding himself on the defensive against a left-wing alliance led by hard-left firebrand Jean-Luc Melenchon.
At stake in the two-round vote on June 12 and 19 is the centrist Macron’s capacity to govern with a free hand and without relying on allies.
The president’s answer has been a steady stream of promises of new handouts, pension hikes and tax breaks to help hard-pressed households make ends meet. “Protection” has become a government buzz word ahead of the vote.
“I call on you to make the choice for protecting your purchasing power and savings as much as protecting the future of the country,” Macron told voters in southern France on Thursday.
Pensions will rise by an exceptional 4% in July on top of a 1.1% raise at the start of 2022, plans are being drafted for new food vouchers for the most needy, and promises have been made to bump up long-stagnant wages in the public sector, although the government has not yet said by how much.
Meanwhile, a fuel price rebate worth 18 cents per litre will be extended through August.
With the bill for anti-inflation support rising fast, Finance Minister Bruno Le Maire said the rebate would later be replaced by a measure targeting those reliant on their cars to get to work.
The latest steps supplement existing measures to help households cope with high inflation that economists say are the most generous in Europe.
The government has already mobilised 25 billion euros – 1.2% of GDP – to boost purchasing power largely by putting costly caps on gas and electricity prices.
That package has kept the inflation spike in France lower than in all other euro zone countries apart from Malta. It nevertheless reached a record of 5.8% in May.
The latest moves to counter rising prices are likely to be equivalent to another 0.4% percentage points of GDP, pushing the total bill to around 40 billion euros, according to the OFCE economics think tank.
Nonetheless, economists are so far largely at ease with the growing strain on the public finances, even though the budget deficit is likely to exceed the 5% of economic output that the government had hoped for this year.
“Is it right to not reduce the structural deficit too quickly? I think measures to support growth and jobs are the right answer to the crisis,” OFCE head Xavier Ragot said.
($1 = 0.9409 euros)
Facing tough vote, France’s Macron dangles anti-inflation sweeteners