France’s Finances to Come under Further Strain Whoever Wins Election

 A voter prepares to cast a ballot at a polling station for the first round of the parliamentary elections in Paris, Sunday June 30, 2024. (AP)
A voter prepares to cast a ballot at a polling station for the first round of the parliamentary elections in Paris, Sunday June 30, 2024. (AP)
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France’s Finances to Come under Further Strain Whoever Wins Election

 A voter prepares to cast a ballot at a polling station for the first round of the parliamentary elections in Paris, Sunday June 30, 2024. (AP)
A voter prepares to cast a ballot at a polling station for the first round of the parliamentary elections in Paris, Sunday June 30, 2024. (AP)

Already under scrutiny from ratings agencies, financial markets and Brussels, France's public finances are likely to come under more strain no matter what the outcome of a snap parliamentary election, which starts with a first round of voting on Sunday.

The main parties have all promised new spending but their plans to pay for it are short on detail and do not always stack up.

Polls indicate that the far-right National Rally (RN) will come first, followed by the New Popular Front left-wing alliance and President Emmanuel Macron's Together trailing in third.

The outgoing government had promised to cut the budget deficit from 5.5% of Gross Domestic Product last year to a European Union ceiling of 3% by 2027 - an objective that may be unattainable after the vote, which concludes with a second round on July 7.

FAR-RIGHT NATIONAL RALLY

If it forms a government, the RN wants as soon as July to cut value added (VAT) sales tax on energy, which it says would cost 7 billion euros for the rest of this year and 12 billion in a full year.

The RN says it would be financed by obtaining a 2-billion-euro rebate on France's EU budget contribution, although the bloc's 2021-27 budget has long since been voted into the books.

The party is counting on big gains from ramping up a levy on exceptional profits from power producers and replacing a tonnage tax on shipowners with normal corporate tax, although that sector's bumper profits of recent years is likely to subside.

The RN also wants to annul a cutback in the duration of unemployment benefits due from in July, a move that the outgoing government says would cost 4 billion euros.

Further out, the RN aims to index pensions to inflation, reduce the retirement age to 60 for people who started work at 20 or before, exempt some workers under the age of 30 from income tax and raise teacher and nurses wages.

It also wants to go ahead with cuts in local business taxes that the current government has had to suspend because they could not be afforded.

The RN would also scrap a 2023 increase in the retirement age to 64 from 62, replacing it with a more progressive system which remains to be specified. The party says it would stick with existing plans to cut the budget deficit in line with France's commitments to EU partners.

Targeting welfare spending on foreign citizens and cutting red tape, the RN has pledged to go head with 20 billion in budget savings this and next year, which the current government has struggled to come up with and detail.

It further wants to renegotiate the European Central Bank's mandate to give it a new focus on jobs, productivity and financing long-term projects.

LEFT-WING NEW POPULAR FRONT

The New Popular Front (NFP) alliance says its first moves would include a 10% civil servant pay hike, providing free school lunches, supplies and transport while raising housing subsidies by 10%.

It says that it can cover the cost by raising 15 billion euros with a tax on superprofits, which remains to be detailed, and reinstating a wealth tax on financial assets, also for 15 billion euros.

Additionally the group wants to freeze prices of basic food items and energy while raising the minimum wage by 14% with subsidies for small firms that cannot otherwise cope.

The alliance would then in 2025 hire more teachers and healthcare workers, step up home insulation with subsidies, boosting public spending by an additional 100 billion euros.

It says the cost would be covered by closing tax loopholes, making income tax much more progressive, restoring the wealth tax on financial assets and setting a maximum inheritance for families of 12 million euros.

From 2026, public spending would reach 150 billion euros annually, notably by increasing the culture and sports ministries' budgets to 1% of GDP.

The NFP would also scrap the 2023 increase in the retirement age and wants to eventually reduce it to 60. The alliance says the extra spending would be financed by tax hikes and stronger growth, but it does not plan to reduce the budget deficit and rejects the EU's fiscal rules.

CENTRIST 'TOGETHER' ALLIANCE

While Macron's party is committed to cutting the budget deficit to 3% of GDP by 2027, institutions from the national auditor to the IMF had serious doubts even before the snap election was called.

Since then, the party has pledged to cut power bills by 15% from 2025 and to match pension hikes to increases in inflation. It says that it will raise public sector wages, but its program does not say by how much.

The party remains committed to no broad tax hikes and will increase the amount parents can gift children tax-free.



China Eyes Electric Vehicle Manufacturing Opportunities in Saudi Arabia

Chinese ambassador to Saudi Arabia (Asharq Al-Awsat)
Chinese ambassador to Saudi Arabia (Asharq Al-Awsat)
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China Eyes Electric Vehicle Manufacturing Opportunities in Saudi Arabia

Chinese ambassador to Saudi Arabia (Asharq Al-Awsat)
Chinese ambassador to Saudi Arabia (Asharq Al-Awsat)

China’s ambassador to Saudi Arabia, Chang Hua, expressed Beijing’s hopes to strengthen its partnership with the kingdom, especially in electric vehicle production and other industries.
Speaking to Asharq Al-Awsat, Hua condemned violations of Lebanon’s sovereignty and the targeting of civilians.
He called for immediate action to reduce tensions and prevent further escalation in the region.
“China is deeply shocked by the high civilian casualties from the conflict between Israel and Lebanon,” Hua said, urging the international community to work on calming the situation.
He emphasized that, no matter how things unfold, “China will always stand for justice and remain committed to peace and stability in the Middle East. We are ready to work with all parties to promote peace in the region.”
China’s Economic Growth
Hua highlighted China’s rise from a $30 billion economy to a $17.8 trillion one, making it the world’s second-largest economy and a leader in trade and industry.
He reiterated China’s goal to maintain high-level openness, push for high-quality economic development, and promote a multipolar world with fair global governance and inclusive economic globalization.
Saudi-China Relations
Hua described the partnership between Saudi Arabia and China as entering a new phase of deep development, congratulating Saudi Arabia on its 94th National Day.
He noted that Chinese Premier Li Qiang’s recent visit to Saudi Arabia has boosted bilateral relations and strengthened the comprehensive strategic partnership, driving it towards a more stable and prosperous future.
The ambassador stressed the need to expand trade and investment between the two countries and highlighted the upcoming “Saudi-Chinese Cultural Year 2025” as a key event.
Hua also pointed out that Saudi Crown Prince Mohammed bin Salman values the strong and historic relationship between the two nations.
The Crown Prince looks forward to further aligning Saudi Vision 2030 with China’s Belt and Road Initiative, expanding cooperation in energy, investment, and culture.
Hua noted that China is Saudi Arabia’s largest trading partner, with bilateral trade exceeding $100 billion in the past two years. He also mentioned the recent currency swap agreement between the two countries, which has helped boost trade and investment.
New Developments in Saudi-China Relations
According to Hua, the cooperation between the two nations has grown significantly, particularly in the automotive, renewable energy, and tourism sectors.
In 2023, Saudi imports of Chinese cars reached $4.12 billion, driven by companies like Changan, Geely, MG, Chery, Great Wall, Hongqi, GAC, and BYD, which have opened branches in the kingdom.
Discussions are ongoing about building local manufacturing plants. China exported 4.91 million vehicles in 2023, making it the largest car exporter globally for the first time, including 1.203 million electric vehicles, a 77.6% increase from the previous year.
Hua noted that Saudi Vision 2030 aims for electric vehicles to account for at least 30% of all cars in Riyadh by 2030, and he expressed optimism about enhancing collaboration in automotive manufacturing.
Chinese companies are also increasingly involved in Saudi Arabia’s renewable energy sector. They are working on multiple solar projects, including the Al Shuaibah photovoltaic plant, the largest of its kind in the world, with a capacity of 2.6 gigawatts.
In July 2023, the Renewable Energy Localization Company (RELC), backed by the Saudi Public Investment Fund, signed agreements with three Chinese firms—Envision Technology Group, Jinko Solar, and TCL Zhonghuan—to establish joint ventures for high-efficiency solar cell production in Saudi Arabia.
These projects will focus on producing solar components, helping Saudi Arabia achieve its goal of sourcing 75% of renewable energy project components locally by 2030.
Hua also highlighted the increasing exchange of visits between citizens of both countries. In September 2023, China and Saudi Arabia signed a memorandum of understanding to facilitate group tourism, making the kingdom an official destination for Chinese tour groups.
Several Chinese travel agencies have begun offering packages to Saudi Arabia, and direct flights between the two countries are increasing. Saudi Airlines has expanded its routes, operating numerous weekly flights between Beijing, Shanghai, Shenzhen, Riyadh, and Jeddah.