Em­manuel Macron throws a €100bn lifeline towards France’s eco­nomic re­cov­ery

The Daily Telegraph - Business - - Front Page - Tim Wal­lace

THE French gov­ern­ment has un­veiled a €100bn (£89bn) four-year stim­u­lus pack­age in an ef­fort to boost the econ­omy and keep the re­cov­ery mov­ing.

Funds are on the way for green projects, tax cuts and em­ploy­ment sup­port af­ter the coun­try’s econ­omy shrank by 13.8pc in the sec­ond quar­ter.

Em­manuel Macron’s hope is to push the econ­omy back to its pre-Covid size in two years and cre­ate 160,000 jobs, then keep spend­ing be­yond that to keep the mo­men­tum go­ing. But the pack­age is also about in­creased na­tional self-re­liance, with the pres­i­dent not­ing the coro­n­avirus pan­demic’s im­pact on longer global sup­ply chains.

“The France of 2030 will have to be more in­de­pen­dent, more com­pet­i­tive, more at­trac­tive. It is about no longer de­pend­ing on oth­ers for es­sen­tial goods, no longer risk­ing crit­i­cal sup­ply dis­rup­tions,” he said.

Called France Re­lance, or Re­launch France, the four-year scheme comes on top of €470bn an­nounced ear­lier in the year. The scheme con­trasts with Bri­tain’s cur­rent hot topic of tax rises, with of­fi­cials look­ing at po­ten­tial ways to raise more rev­enue to plug the gap­ing holes in the pub­lic fi­nances. Spend­ing will be­gin with a se­ries of cuts to busi­ness taxes in an ef­fort to make the French econ­omy more com­pet­i­tive. Of €35bn aimed at com­pet­i­tive­ness, €20bn is ex­pected to go on tax cuts.

Cor­po­ra­tion tax in France is the high­est in the OECD, with a head­line rate of 32pc, in­di­cat­ing there is room to make the tax en­vi­ron­ment more wel­com­ing. By con­trast, Bri­tain’s is 19pc, mak­ing it the fourth-low­est in the group of de­vel­oped economies.

How­ever, the UK is con­sid­er­ing rais­ing the rate, po­ten­tially tak­ing poli­cies on each side of the Chan­nel in dif­fer­ent di­rec­tions, de­spite warn­ings from econ­o­mists that tax in­creases could un­der­mine the re­cov­ery.

The rest of the money aimed at en­hanc­ing na­tional com­pet­i­tive­ness is ear­marked for skills, train­ing and new tech­nolo­gies.

The next €30bn is aimed at re­duc­ing car­bon emis­sions across the French econ­omy. Build­ing in­su­la­tion, bonuses for buy­ing en­vi­ron­men­tally friendly cars, more pub­lic trans­port, and ex­tra fund­ing for re­search and de­vel­op­ment are all on the list.

So­cial co­he­sion spend­ing makes up the rest, in­clud­ing em­ploy­ment sup­port. This also con­trasts with el­e­ments of the Bri­tish ap­proach.

While the UK is wind­ing down the fur­lough scheme by Novem­ber, France is ex­pand­ing a “short work” mech­a­nism to prop up the pay of those work­ers who are only re­quired part-time in­stead of full-time.

Charlotte de Mont­pel­lier, an econ­o­mist at ING, called the French plan “am­bi­tious”, not­ing that it “is mainly an in­vest­ment plan, which aims to strengthen the sup­ply side of the econ­omy more than the de­mand side”.

“By fo­cus­ing on the long term, there is a risk that the ben­e­fits of the re­cov­ery plan will not be suf­fi­ciently felt by the pop­u­la­tion by the time of the [2022 pres­i­den­tial] elec­tions,” she said.

She is not the only an­a­lyst cau­tious on the gov­ern­ment’s ca­pac­ity to spend the money.

“The main risk we see is that the dis­burse­ment of funds will not be as quick as in­tended, with the gov­ern­ment aim­ing to com­mit around 30pc of the €100bn in 2021, with the re­main­ing 70pc dis­bursed by 2024,” said Guil­laume Menuet at Citi.

Not all of the pack­age will be paid for by the French state. As much as €40bn will come from EU funds.

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