FRANCE is expected to announce a package of minor measures aimed at boosting sluggish economic growth, while Germany is set to cut its controversial solidarity tax. But apart from the timing, there appears to be little in common between the proposed French measures to reduce the cost of credit, stimulate consumer spending and promote investment in rental housing, and a tax cut package announced in Bonn.
French officials said Finance Minister Mr Jean Arthuis was likely to announce a half point cut in the 4.5 per cent tax exempt interest rate on the most popular form of savings account, the Livret A, in conjunction with a cut in commercial banks' base lending rates to businesses and consumers.
At the same time, the Bonn government pledged to cut the so called "solidarity surcharge" on income tax which funds reconstruction in former Communist eastern Germany, to 5.5 from 7.5 per cent from July 1st 1997.
French and German officials insist the packages will be neutral on public spending.
The French measures are expected to be announced on the eve of statistics expected to show a sharp rise in unemployment in November and December. They would be approved by the cabinet on Wednesday in a miscellaneous financial measures bill to go to parliament in mid February.
President Jacques Chirac said earlier this month he had discussed the idea of a joint initiative to revive growth, with German Chancellor Helmut Kohl.
But officials in both countries have since stressed the "initiative" would be limited to synchronising the announcement of separate national measures.
On January 21st the French and German finance ministers discussed the causes of the slowdown, which has blown both countries off course for meeting the deficit reduction target for European monetary union.
Economists said cutting the controversial tax was largely a political manoeuvre that should have little impact on budget consolidation.
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