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IN DETAIL: France’s plan to protect its economy from effects of Ukraine war

French PM Jean Castex on Wednesday unveiled the package of measures intended to protect French businesses and consumers from the effects of rising prices. Here's what it contains.

IN DETAIL: France's plan to protect its economy from effects of Ukraine war
French Prime Minister Jean Castex speaks during a press conference to present an economic and social resilience. Photo by Thomas SAMSON / AFP

The objective of the plan is to “protect households and businesses from the shock” that is the war in Ukraine, said Castex, before announcing measures targeted towards the sectors most affected.

The idea is to support hard-hit sectors such as agriculture, haulage and fishing so that they can avoid passing on their extra costs on to consumers.

Castex had already announced a fuel rebate of 15 cents per litre for petrol and diesel, which will come into effect to the benefit of consumers from April 1st. The government will reimburse the sellers the difference. This measure has now been extended to cover LPG and commercial fuel.

For consumers, gas and electricity prices have been limited to a maximum four percent rise until the summer, and that cap is likely to be extended.

But certain other sectors will also receive extra help.

Fishing – there have already been protests from fishermen in northern France, who say that the price of fuel is so high that it is not worth taking their boats out. Castex said that the fishing industry was an “absolute priority”.

The industry will benefit from an extra rebate on fuel costs, in addition to the 15 cents per litre already in place, taking it to 35c per litre until July.

Farming – hit by a combination of the increase in fuel and animal fodder costs, the agricultural sector will benefit from four months of state aid, including a 25 percent rebate on the non-road diesel used by farmers.

There is also a €400 million package to help with the rising cost of animal feed, with full details on provision to be clarified with industry representatives in the next few days. 

Agriculture minister Julien Denormandie added: “There is no risk of food shortages in France. Our agriculture and our food chain is strong, solid and sovereign.” 

Transport – for the haulage industry the 15 centres per litre fuel rebate will also be extended to commercial fuel, and will continue for four months. There will be extra aid for financial losses, to be defined with industry representatives in the coming days.

Construction – already hit by rising costs for building materials, the construction sector has seen further price rises in addition to extra fuel costs. The industry will receive tax rebates and benefit from a suspension of late delivery fees.

Exporters – export companies affected by the Ukraine war will be eligible for ‘stimulus cheques’ to help them develop new markets.

Energy bills – all businesses where gas and electricity bills represent more than three percent of their turnover will also be entitled to extra help – including state backed loans, chomage partiel (furlough) payments and the postponement of tax and social charges.

Castex also announced the goal of ending France’s dependency on Russian gas and oil by 2027, with the “priority of securing next winter’s stocks, particularly via the import of liquefied natural gas”.

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JOHN LICHFIELD

OPINION: Macron’s pension reform is wildly unpopular and badly timed – but essential for France

One thing that everyone can agree on is that Emmanuel Macron's new pension reforms are likely to be highly unpopular and lead to strikes and demonstrations - so why is he doing it? John Lichfield looks at the president's thinking and why France, in fact, needs this reform.

OPINION: Macron's pension reform is wildly unpopular and badly timed - but essential for France

The Belgians do it until they are 65. The Germans keep going until they are 65 and 7 months. The British manage it until they are 66. But the French – in theory – stop at 62 (and French train drivers give up much younger than that).

We are talking, of course, of work and the minimum legal age at which European countries can retire on a full state pension.  

President Emmanuel Macron is about to declare war on the French people. He thinks that they should work longer. An overwhelming majority of French people – at least 70 percent according to recent polls – believe that they should not.

President Macron decided on Wednesday night to push ahead rapidly with a new version of the pension reform which was abandoned (when close to enactment) in March 2020 because of the Covid pandemic.

Militant trades unions have – by coincidence – organised over 200 demonstrations across the country today to protest against several things, including Macron’s desire to delay the retirement age. That is just a taste of the mayhem to come.

Remember the long rail and power worker strikes of 2019? Or the protests of 1995 which almost brought France to its knees? They were both about pension reform.

You can hear John talking more about pension reform in the latest episode of Talking France – download it HERE, find it on Spotify, Apple or Google podcasts or listen on the link below.

After a meeting with senior ministers and leaders of his centrist alliance, Macron has, for now, put aside the idea of imposing pension reform by Christmas by parliamentary putsch. He will allow two months for discussions on detail – but no negotiation on fundamentals – with the unions.

 A draft law to increase gradually the minimum retirement age to 65, or maybe 64, will be presented in December and pushed through by February. The 2023 budget plan published this week assumes that the first stage in delayed retirement will take effect from July.

Macron no longer has a majority in the national assembly to be sure of enacting pension reform by normal vote. He let it be known today that the government will use, if necessary, its powers under Article 49.3 of the constitution. This allows the government to pass one piece of general legislation by decree in each annual session (and an unlimited amount of financial legislation).

READ ALSO What is Article 49.3? 

Opposition members could block a new pensions law by supporting a vote of no confidence (as is their constitutional right). In that case, Macron warned today, he will dissolve the assembly and force new parliamentary elections (as is his constitutional right).

In other words, Macron is ready to play hard ball.

But does it make sense to play hard ball in such hard times?

My favourite French left-wing politician, François Ruffin, the deputy for the Somme (who is sometime annoying but often practical and sensible) describes Macron’s approach as “an act of madness”.

Ruffin said: “After two years of the Covid crisis, with people exhausted, with Emmanuel Macron re-elected without any momentum or enthusiasm, when people don’t know whether they can pay their bills…in this time of exasperation and democracy fatigue, he is going to defy the vast majority of French people – 70 percent to 80 percent according to the polls – and impose pension reform by force.”

So why is Macron doing it? And why now? The first question is easier to answer than the second.

There are two strong arguments for pension reform in France.

As people live longer, a supposedly self-financing system will start to run into deficit next year. According to the official projections, short-falls as high as €10 billion by 2027 and €20 billion by 2032 will have to be paid out of  taxation or state borrowing.

In other words the pension system – in which pensions are supposedly paid from workers’ and bosses’ contributions – will start to limit other spending or swell the French deficit and debt.

Secondly, there is a strong, economic argument that France should work for longer. It is unsustainable for the French to retire three years (at least) earlier than their European partners and competitors.  

France is not a “lazy” country. Those French people who do work do so very productively.  But, taken as a whole, France works less hours than other nations – partly because of the 35 hour week, partly through unemployment but mostly because of the early minimum retirement age.

According to a OECD study, France worked 630 hours a year per inhabitant in 2018, including children and the retired. Germany worked 722 hours per inhabitant; the UK 808 hours, and the USA 826. 

Macron argues that France can only afford its generous social model and can only compete successfully with its European partners and global rivals if – as a nation – if it puts in more hours.

Both these arguments are admittedly open to challenge. The state pension fund deficit is not as big as was once feared. There is actually a surplus this year because so many old people died during the Covid pandemic. In the long run, however, the deficits will grow.

The economic argument can also be quibbled with. Many French people already work beyond 62; many other older people would like to work but can’t find jobs.

In the medium to long term, however, the arguments for pension reform are as powerful as Macron says. But that leaves the question: “why now?” 

Does not France, and the world, have problems enough this winter without Macron picking a huge new fight on the French retirement age?

The President argues that he was given a “mandate” for pension reform by his victory in the presidential election in April. That is dubious. It would be more accurate to say that he lost his parliamentary majority in June because voters detested the idea of working for longer and Macron failed to make the argument why they should.

Now, after a period of drift, the President has decreed that pensions will be the ground on which he fights for a domestic legacy.

Despite a first term disrupted by Covid, despite the loss of his parliamentary majority, Macron wants to be the first President for half a century to leave France stronger than he found it – whether France likes it or not.

Let battle commence.

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