French ‘Debt Tax’ Takes Effect To Ease Social Security Deficit

A “debt tax” on nearly every French man and woman, higher hospital fees and other unpopular austerity measures that provoked weeks of strikes took effect Monday despite the protest.

The “debt tax” of 0.5 percent of revenue imposed on virtually everyone, including retirees and the jobless on welfare, is a cornerstone of Prime Minister Alain Juppe’s austerity plan.

The tax is expected to bring in $5 billion during each year of its 13-year run.

It aims at slashing the $50 billion deficit accumulated since 1992 in the social security system, which covers health care and pensions.

Another measure targeting the social security deficit is a 22 percent increase in the daily hospitalization fee owed by patients - from $11 to $14.

Social security covers the rest.

President Jacques Chirac said the measures were needed to save social security from collapse.

“It’s no longer possible to govern the way we have for the past 20 years: sidestepping the real problems, putting bandages on wounds that don’t heal,” he told the nation on television Sunday.

Also taking effect this month is a measure bitterly opposed by unions - a freeze on salary increases for all 5.5 million public workers.

The cuts in public workers’ benefits and some state enterprises prompted France’s worst strikes since 1968.

For 3-1/2 weeks through mid-December, railroads, buses, subways, the postal service and other public services were paralyzed.

The strike fizzled out after Juppe rescinded some measures affecting railroad workers’ pensions.

But he stuck to the main course of his plan.

Overall, it aims at cutting France’s $64 billion annual budget deficit, a requirement for joining the European Union’s single currency planned for 1999.