By Leigh Thomas
PARIS (Reuters) - French President Emmanuel Macron has ordered further cuts to income tax to be matched euro-for-euro by cuts in public spending to keep the budget deficit from spiraling, the finance minister said on Friday.
In his response to months of anti-government protests, President Emmanuel Macron said late on Thursday that he would cut income tax further by 5 billion euros ($5.6 billion).
"The president has set a principle of which I am the guarantor: each euro of decrease in income tax must be financed by a decrease of one euro in public spending," Finance Minister Bruno Le Maire told LCI television.
The tax cut comes on top of a 10 billion euro package of concessions to protesters in December, which was aimed at boosting the income of the poorest workers and pensioners.
"The latest measures are fiscally expansionary and the risk is that funding them through spending cuts may prove difficult," wrote Morgan Stanley (NYSE:MS) economist Matthew Pennill.
"The overall plan represents a sizeable fiscal boost to the economy. That's good from a growth perspective. But, despite a better budget outturn in 2018, we see risks of extra (debt) issuance going forward, with large-scale fiscal consolidation now looking less likely," he added.
Le Maire said the tax cut would benefit 15 million households and target the middle classes in particular. Budget Minister Gerald Darmanin said it would ease the burden on all but the wealthiest taxpayers by about 10 percent from next year.
That works out to about 300 euros more per household, the OFCE economics think tank's Mathieu Plane told Reuters.
Macron offered the new tax relief as he outlined his response to five-months of protests which have seen some of France's worst street vandalism and looting in decades.
Among the measures announced, the 41-year-old president said pensions of less than 2,000 euros a month would be pegged to inflation, which Darmanin said would cost 1.4 billion euros from next year.
In addition to spending cuts, Macron said tax cuts would be offset by scrapping tax loopholes companies can benefit from, but added the French would ultimately have to work longer.
Nearly two thirds of people polled shortly after the press conference found Macron to be unconvincing, according to a Harris Interactive survey.
