In the fight against high unemployment, French President Nicolas Sarkozy announced the lifting of VAT by 1.6 percentage points. The rate will reach 21.2 percent, writes in today’s issue Le Monde. Several months before the presidential elections unemployment is near record twelve. Sakrozi blames it primarily the high cost of labor, which, however, is challenged by strong unions. After France lost the best credit rating, Sarkozy, according to recent opinion polls after a rival Francois Aland is under enormous pressure. According to a survey of Ifop, published today, voters believe Aland for the best candidate to tackle unemployment (46% vs. 22% for Sarkozy). He has already attacked the financial sector and presented a series of tax changes on the rich, which he says it’s time to make a tribute to escape from the crisis. Sarkozy, in turn, has already announced it would reduce the contribution made by employers, which will be offset by slightly higher VAT paid by all users. The President introduced new measures to reduce working hours and wages to save jobs and raising VAT to reduce employers’ contributions of 13 billion per year. In defending their efforts to rescue the euro and the French economy, Sarkozy said: “The financial crisis is back. Europe is no longer on the brink of the abyss … There are elements to stabilize the financial situation worldwide and in Europe. “The president said he would announce the” end “of the 35-hour workweek in France. He also said that the proposals of the Socialists to return the retirement age of ‘60 . are “crazy” and “lie”.
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Spain and France held a successful auction of government securities, gaining 8.1 billion EUR, a day after six central banks, led by the Federal Reserve (Fed) lowered the cost of dollar funding for European banks. The auctions bond yields fell across the Eurozone. Spain sold bonds for 3.75 billion EUR in yield ranging from 5.19 to 5.54% and the ratio of demand / supply of 2 to 1. France, which enjoys top-notch AAA credit rating, sold bonds for 4.3 billion EUR in yield of 3.18 percent – lower than in the previous auction in Paris on November 3rd. The sale of bonds was to test investor confidence after the Fed, European Central Bank (ECB) and Bank of Canada, Japan, Switzerland and Britain dropped the price of a coordinated emergency loans in dollars to European banks.
“Both auctions were pretty good”, said Hugh Worthington, strategist at Barclays Capital in London. “Yields are higher than they want, but the auctions were strong. Actions of central banks yesterday definitely helped.” France sold securities with maturities in October 2017, October 2021, April 2026 and April 2041, while Spain sold bonds maturing in April 2015 and January 2016 and January 2017.
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The decision of the agency Standard & Poor’s lowered the credit rating to the U.S. cause serious discussions about the next party will lose considered risk-free evaluation – AAA. According to many analysts the most likely such a fate befall France. Currently the price of swaps to protect against default on the French debt is higher than that of countries with low credit rating such as Malaysia, Thailand, Japan, Mexico, Czech Republic, and that this debt in the U.S. state of Texas, says media .
“In my opinion France is not a party worthy of the AAA rating,” said Paul Donovan, a chief economist at Swiss giant UBS. “France can not print money, which is the main distinction from the U.S.. The country simply is not considered by market participants as a AAA rating”, he said. While in the past few months and the three leading rating agencies have confirmed their top rating in France, market confidence shows otherwise.
“If Italy and Spain have problems, then can we be sure that France can still be seen as part of the” core “of the euro area. This group has fewer countries, “said chief economist for UniCredit area of ​​Mark Valley.
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The French Government announced on Friday a new tax increase amounted to 3.5 billion in 2011, reported Financial Times. The total increase in tax revenue next year will reach 13.2 billion, ahead of Germany’s program to reduce the budget deficit amounting to 11 billion euros in 2011. Revenue from the increase, however, retreated to the increase in VAT by 2,5 percentage points in Britain next year, which is expected to bring 12.1 billion pounds (14.7 billion). The series of tax increases to reduce budget deficit expected for this year’s 8 percent of GDP to 6% in 2011 as promised to the European Union (EU). The plans are based on forecast economic growth of 2.5 percent next year, the International Monetary Fund (IMF), the EU and many economists are optimistic about. The last tax increase should reassure the financial markets, but not cause panic in society. Earlier in the month the French government announced increased taxes on business and the rich worth 3.7 billion euros to help fill the deficit in the pension system. Paris still hopes to collect 1 billion in 2011 from the new bank tax.
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France is now officially part of the gas pipeline project South Stream. This became clear after French energy giant Electricite de France (EDF) signed a contract with Russian gas monopoly Gazprom to join consortium building the gas pipeline South Stream. News was delivered personally by Russian Prime Minister Vladimir Putin, who is visiting in France. We recall that speculation on the participation of France to be strengthened through direct September, and then wrote to the Russian press. At last unofficial information France will take 10% of the company managing the project. At this stage, Gazprom and Italy’s Eni, divided in equal participation in it. The pipeline aims to diversify supply routes of Russian gas to European Union, bypassing Ukraine. Power of the pipeline system will be 63 billion cubic meters. South Stream project envisages the construction of underwater pipe that will link the Bulgarian Black Sea with the Russian coasts. Pipeline from Bulgaria will be divided into two sections. The first would have notified the south of Greece and Italy, and others will continue to the northwest to Central Europe.
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The index of investor confidence in the euro zone rose to -12.6 points in October from -14.6 points in September. This is the highest value of the index of July 2008, it is clear from the data of the research institute Sentix. Economists had predicted a slightly stronger growth of the barometer of investor confidence to -12 points. The index recorded a monthly increase for the seventh last eight months under the influence of expectations that Europe’s economic situation will improve. Moreover, the uncertainty of investors regarding the U.S. economy has disappeared. Increases significantly and their assessment for developing economies, particularly those from Latin America. The study of Sentix was conducted in early September, among the 3 thousand individual and institutional investors. It reveals that their optimism for the future is growing again because of the expectations index rose by 5.75 points to 5.5 points for September. Assessment of current economic conditions rose to -29.25 to -32.75 points points.
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