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. Last Updated: 07/27/2016

French Budget to Increase Taxes

PARIS -- Fears that France's new Socialist-led government would plunder life insurance revenues to cut its budget deficit have abated, and while new taxes are expected when the 1998 budget is unveiled Wednesday, few expect a major market impact.

Prime Minister Lionel Jospin has pledged the budget will show a public deficit of 3 percent of gross domestic product next year without any new austerity measures.

During the election campaign earlier this year Martine Aubry, now employment minister, said the Socialists planned to raise 40 billion francs ($6.6 billion) in tax on capital-generated income, principally from life insurance revenues.

Analysts said it was now unlikely the government would raise that much from life insurance because of concern that capital flows out of France would remove a prop from the French bond market.

To address chronic deficits in the welfare accounts, the government has said it will cut payroll charges that now pay for health care and replace them with an increase in a broad-based income tax called the Contribution Sociale Generalisee, which is also charged on income from savings.