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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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POLITICS

Biden hosts Macron for banquet as French president blasts ‘aggressive’ US subsidies

France's Emmanuel Macron was set to be hosted by President Joe Biden at the White House Thursday for a state visit mixing sumptuous ceremonies with hard-edged talks on transatlantic trade and how to manage a rising China.

Biden hosts Macron for banquet as French president blasts 'aggressive' US subsidies

A military honor guard was due to be standing ready at the White House to welcome the French leader, accompanied by his wife, Brigitte, before the two presidents meet in the Oval Office for what are expected to be substantial discussions as they seek to defuse tensions over what Macron has described as “aggressive” subsidies for US manufacturers.

They were to give a joint press conference ahead of winding up the day with a lavish dinner featuring French favorites of wine and cheese — but in both cases American-made.

The two governments have emphasized their historic links — France is the United States’ oldest ally — as well as their close partnership in the Western alliance confronting Russia’s invasion of Ukraine.

However, Macron made clear, in unusually blunt language, that he is not just in Washington to discuss the easy parts of the relationship.

At a lunch with lawmakers and business leaders Wednesday, he lashed out at Biden’s signature policy called the Inflation Reduction Act, which is set to pour billions of dollars into environmentally friendly industries, with strong backing for US-based manufacturers.

The White House touts the IRA legislation as a groundbreaking effort to reignite US manufacturing and promote renewable technologies. European Union governments are crying foul, threatening to launch a trade war by subsidizing their own green economy sector.

“This is super aggressive for our business people,” Macron said, warning that what he sees as unfair US practices will “kill” European jobs.

“The consequence of the IRA is that you will perhaps fix your issue but you will increase my problem. I’m sorry to be so straightforward,” Macron said.

The White House responded by insisting that the state visit is about the two presidents’ “warm relationship.”

US advances in the clean energy economy will help Europeans too, White House Press Secretary Karine Jean-Pierre said. The IRA “presents significant opportunities for European firms as well as benefits to EU energy security. This is not a zero-sum game.”

In a speech later at the French embassy, Macron said the subsidies could become a real sticking point in US relations with Europe.

While voicing support for the environmental goals of the IRA, Macron said “these are choices that will split the West,” even as he agreed that ties remained solid for now.

On Wednesday evening, he and his wife joined Biden and First Lady Jill Biden for dinner in an Italian restaurant in Washington for a moment that was both private and “political,” according to an adviser to the Elysee, ahead of Thursday’s official events.

Also on Wednesday, Macron joined Vice President Kamala Harris at NASA headquarters in Washington to discuss cooperation in space — and to propose putting the first Frenchman on the Moon.

Menu and music

Macron’s two busy days in Washington will culminate Thursday with the first formal state dinner of Biden’s presidency — the grand tradition having been shelved due to Covid-19 restrictions.

Grammy-award-winning American musician Jon Batiste will perform at the banquet, which the White House said will kick off with butter-poached Maine lobster, paired with caviar, delicata squash raviolo and tarragon sauce.

The main course features beef and triple-cooked butter potatoes, before leading to the cheese course of award-winning US brands, and finally orange chiffon cake, roasted pears with citrus sauce and creme fraiche ice cream.

Washing all that down will be three different wines — all from US vineyards.

China high on agenda

Trade tensions, however, are only part of the uncomfortable flip side to the red carpet occasion.

Another gripe in Europe is the high cost of US liquid natural gas exports — which have surged to help compensate for canceled Russian deliveries.

There is also divergence on how to deal with the rise of superpower China. The question — with Washington pursuing a more hawkish tone and EU powers trying to find a middle ground — is unlikely to see much progress.

“Europe has since 2018 its own, unique strategy for relations with China,” tweeted French embassy spokesman Pascal Confavreux in Washington.

White House National Security Council spokesman John Kirby said China will be “very high on the agenda” this week but stressed that both countries share a broad approach.

“We believe that not only France, but every other member of the G7 — frankly, our NATO allies too — see the threats and challenges posed by China in the same way.”

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