French left-wing alliance pledges to offset spending surge with tax

PARIS (Reuters) -France's newly formed New Popular Front left-wing alliance will progressively lift annual public spending to 150 billion euros more than now, but will offset the increase with tax increases, alliance officials said on Friday.

The New Popular Front has said that, if elected in a snap two-round parliamentary election on June 30 and July 7, its first measures would include reversing President Emmanuel Macron's pension reforms and scrapping a 2023 rise in the retirement age to 64 from 62.

It also aims to raise public sector wages 10% immediately and to boost housing subsidies by 10%, while making school lunches, supplies and transport free.

The extra spending this year would be offset by a tax on companies' super-profits generating 15 billion euros ($16.03 billion). Restoring a wealth tax on the rich was expected to also yield 15 billion euros.

A second raft of measures next year would include a wave of teacher and healthcare hires and spending on building renovations and renewable energy.

"In the year of 2025, public spending could reach 100 billion euros," senior alliance member Eric Coquerel told reporters, adding that tax increases would cover the increase and rise to 150 billion in 2026-2027 to offset further spending increases.

"Our logic is not to increase our programme by an increase in deficits," Coquerel said.

Paris is already under pressure to reduce its public sector budget deficit after the European Commission, the European Union's executive body, recommended on Wednesday that France face disciplinary steps for running a public sector budget deficit in excess of an EU limit of 3% of economic output.

France's fiscal shortfall hit 5.5% last year. Macron's government had pledged to bring it in line with the EU ceiling by 2027, the year next presidential election is due.

Another Popular Front official, Alexandre Ouizille, said that while the alliance would not increase the deficit if it is able to form a government, "we also won't reduce it".

French bonds sold off, triggering a rise in borrowing costs, after Macron called the snap election, with investors worried that France's finances will suffer whatever the outcome.

Opinion polls put the far-right National Rally (RN) in the lead before the election. The RN has yet to detail the cost of its programme and how it will be financed.

($1 = 0.9357 euros)

(Reporting by Leigh Thomas and Dominique Vidalon, Editing by Sudip Kar-Gupta and Timothy Heritage)