Budgetary Tricks

by Jerome a Paris Thu Jan 26th, 2006 at 06:08:35 AM EST

This could be an occasion to crow, as France has unexpectedly managed to lower its budget deficit this year and to bring it back to the Maastricht Treaty-mandated 3% of GDP, while the UK is being scolded by the EU for its excessive deficit.

But alas, this will not happen, as Le Canard Enchainé provides in loving detail an insight on the various tricks that were used by the Villepin/Breton duo (PM/Minister for Economy) to artificially lower the deficit, which would have otherwise reached 3.8% of GDP, or EUR 12 bn more than announced:

• thanks to a discreet budgetary amendment, some company taxes due on 31 March were brought forward to 31 December. To make sure it would be applied, the ministry wrote to the biggest companies to cough up. Total paid up EUR 350 M (which of course it won't pay in 2006);

• Similar pressure was put on the mobile phone operators to pay before the end of last year the EUR 534 M fine they received for cartel behavior;

• Even better: the government included in its 2005 income a lump sum payment of EUR 7.7 bn from EDF, meant to compensate the transfer of EDF's pensions obligations to the national pensions scheme. This is allowed under normal budgetary rules (of course, it will increase public spending by several hundred million euros every year in the future) but what is more unusual is that EDF actually paid only EUR 3.3 bn in 2005, and has until 2025 to pay up the rest - but the government counted the full amount neverheless (it's legal, but very enronesque);

• in a similar vein, the government has pushed onto 2006 a number of expenses. For instance, government subsidises zero-interest home purchase loans to poor families. This used to be done via direct payments to banks. Now, instead, it will be done via tax credits to the banks, and thus deducted from tax income in the future... The same has been done for a number of other similar programmes.