PARIS (Reuters) – France will spend 100 billion euros to help pull its economy out of one of Europe’s worst coronavirus-induced slumps, under a recovery plan that revives pro-business reforms championed by President Emmanuel Macron with a greener tinge.
French Prime Minister Jean Castex speaks during a news conference to present his government’s economic recovery plan from the Covid-19 pandemic, in Paris, France September 3, 2020. Ludovic Marin/Pool via REUTERS
The $118 billion stimulus equates to 4% of gross domestic product, meaning France is ploughing more public cash into its economy as a percentage of GDP than any other big European country, an official said ahead of its formal launch later on Thursday.
France’s recession, marked by a 13.8% second quarter GDP contraction that coincided with a COVID-19 lockdown and expected to generate an 11% drop in 2020 as a whole, has also been one of the region’s deepest.
Focused mainly on boosting companies and running over two years, the stimulus package earmarks 35 billion euros to make the economy more competitive and 30 billion to promote greener energy policies.
The rest will go on supporting jobs, training and broader social initiatives.
“This recovery plan aims to keep our economy from collapsing and unemployment exploding,” Prime Minister Jean Castex said on RTL radio.
He said the government aimed to create at least 160,000 jobs next year under the plan.
Macron is banking on the plan returning the euro zone’s second biggest economy to pre-crisis levels of activity by 2022 – re-election year should he decide to run again – after what is expected to be its worst post-war recession.
However, it does little to directly support the traditional the engine of French growth, consumer demand. By contrast, neighbouring Germany launched a 130 billion euro stimulus in June with a cut in value added sales tax.
Instead, France is betting that, by supporting jobs, the plan will give consumers the confidence to start spending the 100 billion euros in extra savings that they built up during the two-month lockdown.
With already flagged cuts in business taxes worth 10 billion euros in both 2021 and 2022, its timeline would restore Macron’s record on the economy while putting back on track a pro-business agenda that has foundered under a pushback by powerful unions and, latterly, the coronavirus crisis.
GREENING THE ECONOMY
The new public funds are focused on the industrial, construction and transport sectors, all which suffered during one of Europe’s strictest lockdowns.
Much of the new investment seeks to accelerate a transition away from fossil fuels, which Macron has made a priority since his ruling party suffered losses to environmentalists in municipal elections this year.
“It’s good but this can’t be limited to two years, we need to keep it up for 10 years,” said lawmaker Mathieu Orphelin, who left Macron’s party last year to set up a more environmentally focused party.
Rather than grand new projects, much of the new investment will go into the transport sector and the aging rail network specifically, while about 6 billion euros is slated for making public buildings and homes better insulated.
The hydrogen industry – used to store and transport energy created by wind turbines and solar panels – will get 2 billion euros over two years, a sector that Germany is also betting heavily on with plans to invest 9 billion euros by 2030.
Reporting by Leigh Thomas; Additional reportign by Elizabeth Pineau; Editing by John Stonestreet