(Bloomberg) -- President Emmanuel Macron’s efforts to protect France from a surge in energy prices are costly, too broad and must only be temporary, the International Monetary Fund said.
The institution’s caution comes after the French government -- with just three months to go until elections -- pledged billions in extra spending to mitigate the threat to household budgets.
“The cap on gas prices and the cut on electricity taxes are poorly targeted -- and thus more costly -- and distort price signals in the economy, besides running contrary to the objective of greening of the economy,” the IMF said in its Article IV report on the French economy.
Cutting taxes on electricity as part of a plan to limit an increase in bills to 4% this year will cost public finances almost 6 billion euros ($6.8 billion), while a temporary freeze in gas prices will add another 1.7 billion euros.
The IMF also said a separate program to offset inflation with 100-euro checks for around half of France’s population is “not sufficiently means-tested and partially overlaps with other support measures.”
While the French government has stressed that its measures will be temporary, Finance Minister Bruno Le Maire has also said taking action to protect households and firms was “an absolute emergency.”
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