French economic recovery programme risks being overtaken by new lockdown

A plan announced with fanfare two months ago to support the French economy's recovery from the coronavirus pandemic has yet to be finalised but is already at risk of being overtaken by events as the government has imposed a second lockdown.

French economic recovery programme risks being overtaken by new lockdown
French President Emmanuel Macron chairs a video conference with foreign company executives on November 6, 2020, as part of a "mini choose France" forum, designed designed to attract more foreign busin

“This 'Relaunch France' strategy … is not a strategy to confront the difficulties of the moment, that we have already done and we'll continue to do…, no it is to prepare France for 2030,” President Emmanuel Macron said shortly before the government unveiled the programme at the start of September.

Yet the government said the programme's 100 billion euros in spending over two years, with one-third consecrated to supporting shifting the economy onto a sustainable environmental basis, aims to return the French economy to its pre-pandemic level by 2022.

But that goal is now under threat with a second wave of coronavirus cases having pushed the government to adopt a new lockdown.

While the restrictions are less severe than during the original March-May lockdown, it will still disrupt huge sections of the economy as businesses that welcome the public such as restaurants, gyms, theatres and cinemas, shut their doors.

READ MORE: What closes and what stays open during France's second Covid-19 lockdown?

'Time lag'

“There was a time lag between the announcement of the recovery plan, which was elaborated based on a scenario of only one wave of the epidemic, and today we need to go into a lockdown again with the resulting economic consequences,” said Anne-Laure Delatte, an economist at France's CNRS national scientific research centre.

According to an analysis published by the Institut Montaigne think tank on Friday, just over a fifth of the 100 billion euros will provide short-term support to the economy. Half of the money will only have an effect over the medium or long term. The rest will likely have a mixed effect.

The government's plan was also based on the expectation of a strong rebound in the economy. It has forecast 8 percent growth in 2021 following an 11 percent drop this year.

But that rebound is likely to be less pronounced as it will take longer, which even the government acknowledges.

“We'll have to re-evaluate these figures in light of the duration of the confinement,” Economy Minister Bruno Le Maire said Wednesday.

Demonstrators from various economic sectors gather to protest against the closing of 'non-essential' business in Toulouse, southern France on November 6, 2020, during the national lockdown aimed at containing the spread of Covid-19. Lionel BONAVENTURE / AFP

The European Commission and IMF have already lowered their forecasts for France next year, seeing respectively 5.8 percent and 6 percent growth.

“We're in a situation of extreme uncertainty: we're beginning to realise this isn't the final wave and then you have to add in the international context with Brexit and to a lesser extent the US election,” said Delatte.

Depending on the health situation at the end of the lockdown “either there'll be a dynamic rebound, probably similar to what we saw in the third quarter, or households and businesses will anticipate another lockdown and some will undoubtedly adopt a wait-and-see attitude,” said Xavier Ragot, head of the independent French Economic Observatory.

With consumer spending and business investment two critical elements of the economy, a wait-and-see attitude would hobble a rebound. A recovery programme, in addition to directly stimulating the economy, should also give consumers and businesses confidence to spend.

A customer pushes a trolley past the closed toy department of a supermarket in Bordeaux on November 4, 2020, on the sixth day of a lockdown aimed at containing the spread of Covid-19. Supermarkets banned on November 4, 2020 the sale of “non-essential products.” Philippe LOPEZ / AFP

'Late and poorly calibrated'

After weathering the first lockdown many companies find themselves in a weaker position, often with more debt.

The French Senate's finance committee has called on the government to adjust the recovery plan. Its spokesman, Senator Jean-François Husson called it “late and poorly calibrated”, saying he believed the government “should now favour temporary measures to support the economy”.

Several economists have called for support to help companies to avoid cash crunches and stave off a possible wave of bankruptcies. The plan only includes 3 billion euros of this type of support.

“This is essential as once you have one company which goes bankrupt, in reality you'll have a cascade because the suppliers and clients will themselves be put in difficulty,” said the CNRS's Delatte.

Companies will also likely need to make greater use of the temporary furlough programme under which the government picks up a majority of the salaries of employees which are idled due to confinement restrictions or a drop in activity, said the French Economic Observatory's Ragot.

Meanwhile, the Institut Montaigne said households with modest incomes would likely need more support as crises accentuate inequality.

The government does not exclude the idea of reinforcing short term measures such helping companies meet their rent.

The economy minister said other measures can be introduced into the draft of the 2021 budget, even if he defended the government's current strategy.

READ MORE: What are the rules of France's second coronavirus lockdown?



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Cutting back and applying for benefits: How the weak pound has impacted Brits living in France

In recent weeks, the pound has become weaker when compared to other currencies, namely the euro. This has made life more complicated for Brits living in France. The Local asked readers to share their experiences - and advice - for others who find themselves in the same situation.

Cutting back and applying for benefits: How the weak pound has impacted Brits living in France

While the pound is still low when compared to other currencies, it has recovered somewhat since its drop after the British Chancellor’s mini-budget.

As of October 5th, the exchange rate was £1 to €1.14. For British people living in France who receive income in pounds sterling – whether they be pensioners or others with financial interests still in the UK – the drop in the pound’s value has had negative impacts.

The Local reached out to readers to hear how they have been affected by the exchange rate. Many offered their tips for navigating the current economic landscape.

Many readers found life still affordable, but expected to be more severely impacted in the future. Retiree A. Wood, who lives in Haute Vienne, said that “The recent drop in the value of the pound will not immediately affect me. If it remains low for more than a year then maybe I will have to do some calculating.”

Pensioners especially said that life in France had become “more expensive” and “costlier” for them, but being aware of price rises and managing the changes “with care” were plausible solutions for the time-being.

In general residents of France are better protected from inflation than many other European nations, thanks to government initiatives such as energy price caps and fuel rebates, but prices for many everyday items such as food have been rising steadily.

One respondent, Nigel Harrison, a retired former business consultant, said that weak pound has “not made life unaffordable, but worrying.” 

Meanwhile, some readers, all of whom are also retired, said that they were starting to feel more serious impacts of the exchange rate.

Retired librarian and micro entrepreneur, Pat Hallam, who has been living in Paris for the last two years, said that she receives her career pension in pounds, which she later transfers into euros by way of her French bank account.

She explained that she already works to supplement the cost of life in Paris, but now she expects to have to take on extra work.

She expects to also “cut back on things like socialising, eating out and culture.”

“Explaining this to friends will be hard, and it is what makes living in Paris a pleasure. I know the cost of living would be cheaper in other parts of France, but I’ve spent the last 2 years building a life in Paris, my dream destination. I would be very disappointed if events across the Channel forced me to move away, or even back to the UK,” she said.

READ MORE: The best banks for non-EU citizens living in France

Pat is not alone – Tom Baker, who is retired and lives in south-west France – said, “All my pensions are from the UK and the drop in exchange is definitely felt, coupled with the loss on transferring the money to France as I have five pensions.”

Baker explained that having his income drop has been particularly difficult “as a 74 year old with two young sons aged seven and 10” and amid “the present financial climate the cost of everything is spiralling.” 

Many readers said they would try to live on savings while waiting for the value of the pound to rise again, which has also posed its own problems, as many British bank accounts have begun closing the accounts of non-UK residents. 

John Stanley Mumford found himself in this situation, he said: “I have a pension in pounds. I will live on savings until the value of pound goes up! But, Barclays bank is to close my account as I am a French resident, so basically I’m stuffed!”

READ MORE: Banking giant Barclays to close all accounts of Brits living in France

Non-pensioners have also felt the impacts of a weak pound. One respondent discussed the dilemma of attempting to sell their UK home, and worrying about whether they should leave the money in pounds or transfer it to Euros afterwards. Others worried about their UK savings accounts.

Respondents did offer helpful advice for others in similar positions – ranging from tips to try to hold out for a better exchange rate to recommendations for how to become thriftier – like getting rid of unused streaming services and cutting back generally. 

Tom Baker said he recommends transferring funds “perhaps every three months to reduce the cost of transfer fees, which since Brexit have really increased.”

He also said that he checks the daily rate “for a week or 10 days before the transfer is needed to try and get a better each rate.” Others said if possible – wait until the pound recovers.

However, for those unable to hold out until the pound is stronger, several readers recommended apps and international banking services, such as Wise and Revolut as handy ways to find better exchange rates and avoid high fees when transferring between a UK bank and a French one. 

Finally, Pat Hallam counselled Brits living in France to consider applying for welfare benefits if necessary. She said even if you’ve never considered it, “either out of pride or because you didn’t think you were eligible, maybe now’s the time to look again.”

She also recommended tracking energy use more carefully via a smart metre: it “takes three months’ use before you can start comparing consumption but it helps keep track of your energy use.”

READ MORE: Living in France: How to cut your household energy use by 10% this winter

Many thanks to everyone who took part in our survey and shared their experiences and tips.