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UKRAINE

How will France protect its economy from the effects of the Ukraine war?

The French government is set to present a plan which it hopes will protect businesses and consumers in France from the economic effects of the Ukraine war and ensuing sanctions. So what is this plan likely to contain?

How will France protect its economy from the effects of the Ukraine war?
Vehicles drive past a board indicating energy prices at a petrol station in southern France. (Photo by Pascal Guyot / AFP)

The government is set to present next week the multi-stage “economic and social resilience plan” promised by President Emmanuel Macron in his TV bulletin to the nation.

The Prime Minister’s Office at Matignon, which has been charged with developing the plans, said on Tuesday that the plan would ‘evolve’ according to the needs of France and in response to possible counter-sanctions from Russia.

The announcement came after Prime Minister Jean Castex held a five-hour meeting with representatives of the economic sectors affected by the invasion and with trade unions and employers’ organisations.

But what is the plan likely to include? 

The most important thing is, perhaps, what it won’t include. France’s Economy and Finance Ministry has said that – unlike the Covid pandemic – this is not a “whatever it takes” situation.

There is a great deal we don’t know, but it seems clear that the first stage will target help for households hit by rising prices as well as the most exposed businesses. 

Fuel pumps

Petrol in France has already hit €2 a litre and is likely to rise, dealing a heavy blow to motorists in rural France, as well as businesses. 

Macron has hinted at some of the packages he has in mind – suggesting that measures such as the €100 inflation allowance distributed in December, plus a mileage allowance for people who drive for work, may be brought in again.

“We are thinking about the [mileage allowance] tool” Matignon said, and has indicated that it will act to offset the rising price of fuel next week and urged motorists to remain calm – pointing out that France has enough strategic fuel stocks to cover the country’s needs for three months, even if no more oil was imported.

The resilience plan will consist of “a multi-stage response, with a package that will first deal with households and part of the (aid to) companies”.

For businesses, the sectors “have not asked for cross-cutting devices but rather targeted”, calling for “diverse responses”, observed the advisers of Matignon, citing the case of aerospace whose first supplier of titanium is a Russian company.

Gas prices 

Gas and electricity prices in France are currently capped at a four percent rise until June, and the price cap could be extended beyond this date.

As of March 1st, 21.6 percent of France’s natural gas reserves were still available, according to BFMTV. Normally, stocks build up from now, as warmer spring weather arrives – though they are still affected by seasonal fluctuations. A cold snap in April, similar to last year, would see demand rise again, for example.

France is less exposed to uncertainty over Russian gas supplies, since it also has its own domestic nuclear sector for power.

However, the PM’s office said: “We need to fill up our gas reserves as much as possible, in anticipation of the coming winter.

“France has a challenge to reduce its vulnerability in the medium term in terms of energy.” 

French business

The plan will also offer support to businesses directly affected by sanctions against Russia as they seek to secure raw materials from other sources and to deal with increases in energy costs. Again the aid will be targeted and specific.

“Our entire economy is not at risk of a sudden stop. But there will be collateral damage for businesses and households,” the Prime Minister’s Office said.

“We have engaged a census of the companies most concerned by possible disturbances, I think in particular on the gas market” industry minister, Agnès Pannier-Runacher, told BFMTV.

Food prices

It’s also likely that food prices will rise, both for imports and for domestically produced goods as farmers are hit by rising costs for fuel.

The agriculture industry has been among the sectors consulted and farmers have been singled out for support, in order that they will be able to minimise the price rises that they pass on to consumers.

Date

The plan will be presented “next week”, government spokesman Gabriel Attal told journalists on Wednesday, without mentioning a specific date.  

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UKRAINE

France to build new floating terminal to ensure gas supplies this winter

The French government aims to have its natural gas storage reserves at full capacity by autumn, with European countries bracing for supply cuts from major supplier Russia as the Ukraine war continues, Prime Minister Elisabeth Borne said on Thursday

France to build new floating terminal to ensure gas supplies this winter

“We are ensuring the complete filling of our storage capacities, aiming to be close to 100 percent by early autumn,” and France will also build a new floating methane terminal to receive more energy supplies by ship, Borne said.

France is much less dependant on Russian gas than its neighbours, and announced earlier this week that it has not received any Russian gas by pipeline since June 15th.

Meanwhile Germany moved closer to rationing natural gas on Thursday as it raised the alert level under an emergency plan after Russia slashed supplies to the country.

“Gas is now a scarce commodity in Germany,” Economy Minister Robert Habeck told reporters at a press conference.

French PM Borne on Thursday also confirmed that the bouclier tarifaire (price shield) will remain in pace until the end of 2022 – this freezes the price of household gas and limits rises in electricity bills for homes to four percent.

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