PARIS (Reuters) – France plans to spend 100 billion euros ($118 billion) to pull its economy out of a deep coronavirus-induced slump, signalling renewed efforts by President Emmanuel Macron to push through a pro-business reform agenda.
FILE PHOTO: People walk on the esplanade of La Defense in the financial and business district of La Defense, west of Paris, France March 26, 2018. REUTERS/Gonzalo Fuentes
The stimulus equates to 4% of gross domestic product, meaning France is ploughing more public cash into its economy than any other big European country as a percentage of GDP, 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 the country’s COVID-19 lockdown and is set to generate an 11% drop in 2020 as a whole, has also been one of Europe’s deepest.
The stimulus package earmarks 35 billion euros to make the economy more competitive, 30 billion for more environmentally friendly energy policies and 25 billion for supporting jobs, officials said.
“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 thanks to the plan.
Focused mainly on boosting companies and due to run over two years, the plan does little to directly support consumer demand – traditionally the engine of French growth – in contrast to a 130 billion euro stimulus launched in spring in Germany with a value added sales tax cut.
Macron’s government is banking on the plan to return the euro zone’s second biggest economy to pre-crisis levels of activity by 2022 after what is expected to be its worst post-war recession.
That timeline would restore Macron’s record on the economy in case he decides to run for re-election in 2022 after the coronavirus crisis wiped out much of the economic gains made before then on growth and jobs.
The recovery plan aims to put Macron’s pro-business push back on track, with already flagged cuts in business taxes worth 10 billion euros annually and fresh public funds to give a boost France’s industrial, construction and transport sectors.
Officials said the transport sector would get 11 billion euros with 4.7 billion targeting the rail network in particular, while energy-efficient building renovations would be spurred with 4 billion euros for public buildings and 2 billion for homes.
The hydrogen industry, increasingly seen as a key building block in the transition away from fossil fuels, would get 2 billion.
Another 1 billion euros would be offered in direct aid for industrial projects, including 600 million euros to help firms relocate plants abroad back to France.
Some 80 billion euros of the overall cost of the plan will weigh directly on the budget deficit, with EU subsidies offsetting 40 billion euros, officials said.
Reporting by Leigh Thomas; Editing by Marguerita Choy and John Stonestreet