France prepares €100 billion rescue package to save coronavirus-hit economy

France is due to present a mammoth spending plan for its virus-hit economy Thursday, hoping to reverse a dramatic downturn in growth and ward off the threat of mass layoffs at struggling companies.

France prepares €100 billion rescue package to save coronavirus-hit economy
Can Emmanuel Macron's government kickstart the economy and save French jobs? Photo: AFP

President Emmanuel Macron's government has earmarked €100 billion to counter the devastating impact of the coronavirus at a time when daily virus numbers in France are on the rise again.

The sum, a combination of new spending and tax breaks, is four times the amount France spent over a decade ago to deal with the global financial crisis, and represents a third of its typical annual budget, Prime Minister Jean Castex said ahead of the plan's launch.

The French budget boost is separate from a €750 billion European Union plan agreed after acrimonious haggling in July.

Some critics say the money may come too late to save many companies, while others say high hopes for Macron's green revolution in the French economy are likely to be dashed.

The virus impact has plunged the French economy into its worst downward spiral since 1945, with gross domestic product plunging 13.8 percent in the second quarter, after a drop of more than five percent in the first.

The government expects GDP for the whole year to contract by 11 percent.

Economists have welcomed the departure from the kind of austerity measures seen after the 2008 crisis which were “a huge error,” said Philippe Martin, who heads up the CAE think tank which advises the government.

This time, “the focus is not on public debt,” agreed Xavier Ragot, president of the OFCE economics institute.

The economy saw a lively but brief rebound just after the end of lockdown measures in mid-May, but has since shown worrying signs of sliding back again, while French virus infection rates are back on the rise.

'The France of 2030'

Measures to prevent a feared second virus wave, such as mandatory mask-wearing at the workplace, are seen undermining the very confidence among economic actors that the government is desperately trying to restore.

Unlike the post-2008 crisis response, much of the new plan targets the supply and investment side of the economy, namely businesses.

The measures over the next two years include €10 billion's worth of corporate tax cuts.

Youth employment is also a major target of the spending, with €6.5 billion aimed at encouraging hiring for millions of new entrants on a depressed job market.

Beyond emergency measures, the government also hopes to stimulate investment in green technologies, and help some economic sectors such as health care become more competitive.

“This is not a strategy to deal with the current difficulties, because that's already done,” Macron said last week. “It's to pave the way for the France of 2030.”

Some €30 billion are earmarked for greener policies, some of which will overlap with the €40 billion planned for the country's re-industrialisation.

“How much is 30 billion when you also spend 17.7 billion every year on fossil fuel, and when you cut corporate tax by 20 billion without asking for anything in return?” said Arnaud Schwartz, head of France Nature Environnement, an NGO.


Businesses or consumers?

Others say the government, while keen to help businesses, should not neglect consumer spending that stagnated in July, after a brief spike in the early summer.

French households have accumulated €80 billion in savings since March, significant firepower if people could be induced to spend, analysts say.

But the government has rejected calls for a huge VAT cut like the one seen in Germany, saying its heavy financing of partial unemployment measures had already done much to keep households' purchasing power intact.

“The best way to support demand is to create jobs,” Finance Minister Bruno Le Maire said.

Denis Ferrand, director of economics research institute Rexecode, said the strategy of favouring corporate investment over consumer spending made sense “because household revenues have remained relatively intact.”

Opposition politicians meanwhile have said Macron's plan, which is part of France's 2021 budget to be voted on in parliament only at the end of the year, may be coming too late for many companies.

“Every day lost widens the social divide”, said Socialist party spokesman Boris Vallaud.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


French government calls on over-60s to get second Covid booster as cases rise

As Covid cases show a significant rise in France in recent weeks, the government is calling on all eligible groups to get a second Covid vaccine booster shot.

French government calls on over-60s to get second Covid booster as cases rise

After a 40 percent rise in Covid-19 cases in the last week, the French Health ministry is calling all eligible people – including over 60s and those health conditions – to receive their second booster (fourth dose) of the vaccine.

“It is necessary to redouble our efforts to protect vulnerable people, this is done through vaccination and this campaign of second boosters is absolutely necessary,” said the ministry of health.

The Covid incidence rate is increasing in more than 50 départements across France. Currently, there are an average of 50,000 positive tests per day, which has also been accompanied by an increase in hospitalisations. 

“This is very clearly a reprisal of the epidemic linked to the arrival of new variants of the Omicron family, which are called BA4 BA5,” said infectious disease specialist Anne-Claude Crémieux to Franceinfo. Crémieux added that these variants are faster-spreading.

Therefore, the government is calling on vulnerable people to take their second booster dose (the fourth dose of the vaccine).

So far, only a quarter of eligible people have taken their second booster dose, with an average rate of 25,000 to 30,000 injections per day for the past two months.

“This is not enough, and it is not going fast enough,” urged the Ministry of Health on Tuesday.

The Haute autorité de santé also recently released its recommendation for a vaccination campaign to give a second Covid vaccine booster shot for the wider population, starting in October. 

The HAS recommendation advises starting France’s annual flu vaccine campaign in mid October (mid September for the French overseas territory of Mayotte) and combining it with a campaign to give a second Covid vaccine booster ahead of a possible new wave of Covid in the winter. 

At present although the great majority of the French adult population is vaccinated against Covid with two doses and a booster, a second booster is only recommended for people in high risk groups such as the over 60s and those with long-term health conditions.

The HAS recommendation reads: “At the end of May, the HAS recommended preparing for a booster shot campaign for people most at risk of developing the most severe forms of Covid, and envisaged a booster shot for healthcare workers.

“Those parts of the population most at risk are also those for whom the seasonal flu vaccination is recommended, therefore for logistical reasons the HAS recommends combining the two campaigns.”

The flu campaign is advised to go ahead as normal, starting in mid-October.

The HAS only makes recommendations, the details of policy are up to the government, but it usually follows HAS advice.

The usual seasonal flu campaign in France offers a vaccine for free to anyone in a high risk group, which includes the elderly, people with underling health conditions, healthcare workers and pregnant women – full details HERE on how to get the vaccine.

Those who don’t fit into those categories can still access the vaccine, but must pay for it – €6-€10 for the vaccine and the standard appointment charge to have it administered by a doctor (€25, with 70 percent reimbursed for those with a carte vitale).

The flu vaccine is available from family doctors, midwives and participating pharmacies once the campaign officially launches.

The Covid vaccine is also available from family doctors, midwives and pharmacies, but most of the vaccine centres set up in 2021 have now been closed down.

There is currently no suggestion a return of the health pass, so a second booster shot would be entirely voluntary, but the government has the power to re-introduce such measures if a major wave of Covid hits France over the autumn and winter.

Currently, there are no plans to lower the age minimum (as of now set at 60 years old) for receiving a second booster. Health authorities believe that the immune response after a first booster “continues to sufficiently protect” younger adults.