ANALYSIS: As the economic gloom lifts his rival's ratings, Sarkozy badly needs to restore his reputation
WAS IT daring or desperate? A cunning stratagem or a final throw of the dice from a president running out of time? These were the questions circulating in Paris yesterday after Nicolas Sarkozy told an audience of 16 million television viewers that one of the final acts of his term would be to raise their taxes.
In a set-piece interview broadcast live on eight channels on Sunday night, Sarkozy said he would increase VAT on most goods and services by 1.6 per cent to 21.2 per cent.
The new revenue would be used to make France more competitive by cutting payroll costs paid by employers.
“We have to reignite growth,” Sarkozy said. “We have to catch up in Europe and in the world.”
The change would not come into effect until August, ensuring voters will not feel the pinch before the presidential election in April and May, but the move – resisted by some senior members of Sarkozy’s UMP (Union for a Popular Movement) party – is being seen as a sign of how the incumbent is positioning himself for the spring election.
With polls showing a gap of up to 20 points between Sarkozy and his socialist rival François Hollande in a hypothetical second-round play-off, the Élysée Palace badly needs to restore Sarkozy’s reputation for economic competence. Unemployment is in double figures and the government yesterday cut its 2012 growth forecast from 1 per cent to 0.5 per cent. The economic gloom has lifted Hollande’s ratings, with a poll last weekend indicating voters felt he was more likely to fight unemployment and reduce the public deficit.
Although Sarkozy didn’t mention Hollande by name, the one-hour interview sounded like a direct response to the socialist’s manifesto.
Defying resistance from the country’s banking lobby, the president said France would unilaterally introduce a 0.1 per cent tax on financial transactions in October, albeit more limited than the one he championed as G20 president last year. Among other announcements was a plan to relax labour laws to allow companies and employees negotiate working weeks beyond 35 hours and the easing of building regulations to spur construction and bring down rents.
But the biggest talking point was the decision to announce a rise in VAT just three months before the election. "Sarkozy's shock reforms", read the headline in the right-wing daily Le Figaro,saluting the president's courage.
The Catholic daily La Croixsuggested they were the type of measures normally announced by an incoming leader hoping to benefit from the so-called "honeymoon period".
On the left, however, the plans were roundly dismissed. Hollande denounced the VAT rise as "ill-timed, unjust, unjustified and improvised" and vowed to ask parliament to reverse it if elected in May. "A lost president", said Libération,which lamented the president's "hopeless" performance.
Opponents pointed out that Sarkozy had rejected the idea of a VAT rise as recently as last October, saying it would raise households’ costs and push down consumption.
“Why change policy 80 days before an election? He started off by helping the most privileged [with tax breaks] and is ending by making the working and middle classes pay,” said Socialist Party leader Martine Aubry.
Sarkozy’s supporters say he believes the reforms will show that, unlike Hollande, he is courageous enough to take unpopular decisions. With the euro zone debt crisis appearing to ease – “Europe is no longer at the edge of the cliff,” Sarkozy said – and France having already lost its triple-A credit rating, the UMP’s rhetoric has shifted and now portrays Sarkozy as the man with the courage to kick-start the recovery.
Speaking to reporters yesterday, prime minister François Fillon cited Sarkozy’s “audacious and fair policies, transcending the election calendar” as proof of “his determination to act in the service of the French”.
A question Sarkozy declined to answer during his TV appearance, however, was whether he was now officially a candidate for the presidency. He still refuses to speak publicly about the election, or even to mention Hollande by name. “I have a rendezvous with the French people. I won’t shy away from my declaration,” Sarkozy said. “It’ll be soon.”