In a double blow to President Francois Hollande’s plans he also called on the government to stop raising taxes and instead cut spending. “It will be essential to define the base, interest rates and scope of a possible FTT in order to prevent the risk of destroying entire segments of our financial industry or the offshoring of jobs as well as the highly counterproductive effects on government borrowing and the financing of the economy,” said Noyer in the Bank’s report.
“It is important to strike the right balance between ensuring financial stability, consumer protection and legal certainty – notably concerning the construction of insurance contracts – and promoting economic dynamism. Achieving this balance is one of the prerequisites for a return to sustained growth in France.”
Noyer also urged Hollande to cut public spending as he cannot raise taxes further without hitting jobs.
“The government now needs to concentrate on public spending to meet its target, as the tax burden has reached a very high level and any further increases in employer contributions would lead to a deterioration in both activity and employment,” Noyer said.