The French government said on Tuesday it will fully offset the economic impact of the Iran crisis by freezing parts of public spending, as it unveiled a new package of support measures.
Finance Minister Roland Lescure said that the spike in energy prices and higher bond yields since the start of the war with Iran is expected to cost the state between €4 billion and €6 billion, with €3.6 billion of that linked to rising borrowing costs.
“In the face of these 6 billion euros we expect the crisis to cost, we are putting 6 billion euros in spending on hold,” budget minister David Amiel told reporters following a meeting with lawmakers.
Prime Minister Sébastien Lecornu’s government has committed to offsetting the budgetary impact of measures designed to help households deal with the energy price surge caused by the conflict, although it is facing increasing pressure to expand support further.
Lecornu said emergency fuel subsidies for the fishing and farming sectors will be raised, and that assistance will also be extended to small construction firms and potentially taxi drivers, Reuters news agency reports.
Furthermore, authorities are also preparing plans to extend support to an additional 3 million low-income workers who rely on their vehicles for professional use.
“The philosophy behind what we are trying to achieve is to ensure that our growth remains robust and that certain sectors which are particularly dependent on hydrocarbons are not adversely affected,” Lecornu stated.
France, already among the eurozone’s largest deficit countries, can only justify support measures that are tightly focused on those most in need, Lescure has said.
At the same time, the government is under pressure from the far right to implement an expensive reduction in the 20% value-added tax on fuel, while the hard left is calling for caps on energy prices.