Finance Minister and Central Banker of the Year: The regional winners
French finance chief Dominique Strauss-Kahn did not garner much favour with the business community when in July he slapped a 15% surcharge on corporate profits to help France meet its budget deficit target for Emu accession. The move shook the market's faith in Strauss-Kahn as a free marketeer in socialist garb. It was particularly worrisome given the super-minister's sweeping powers over a range of portfolios that include finance, the economy, industry and the budget.
In his first budget on July 21, Strauss-Kahn faced a difficult balancing-act. He had to bring the government's budget deficit to below 3% of GDP by 1998. That meant either drastic spending cuts, a rise in taxes, or both. But he faced pressure from the left wing of the new Socialist government to increase spending on social programmes and, in particular, to provide a quick solution to France's unemployment problem.
In the end, he flunked the challenge. His was the politically expedient answer of increasing taxes on big business. He raised corporate tax from 36.6% to 41.6% and more than doubled capital gains tax, taking ffr22 billion off the corporate sector.