Eurozone hikes taxes to fill big budget holes

Ben Southwood
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TAX rises may be on the way in Spain and France, say government ministers, who are under pressure to make budget targets.

The French Prime Minister Jean-Marc Ayrault yesterday promised a 75 per cent tax band on earnings above €1m, but confirmed that the government would reverse a sales tax increase due to begin in October.

This may not be enough to fill the holes in their budget estimated to be more than €6bn this year, and €33bn in 2013.

But the PM has positioned himself against austerity and for investment, as growth forecasts were cut to a measly 0.3 per cent for 2012 and just 1.2 per cent for 2013.

And Spain may hike consumption, energy and property taxes to cut its annual shortfall to 5.8 per cent of GDP, from 8.9 per cent in 2011.

This came after Finland and the Netherlands expressed their sharp opposition to the European stability mechanism, which may lend up to €500bn to ailing Eurozone nations. Spain brushed off these threats by pointing out that the usual unanimity may not be required, There is an emergency procedure clause allowing 85 per cent majority rule.

But Italy is in line to meet its budget targets, according to estimates made by Barclays yesterday.

Seasonal adjustments put the budget deficit at just one per cent of GDP – excluding the costs of servicing Italy’s mammoth debt, the country exhibited a surplus of over three per cent in April, the bank said.