France unleashes $160b stimulus to revive economy

The plan earmarks in particular €35 billion for making France's economy more competitive.
The plan earmarks in particular €35 billion for making France's economy more competitive.PHOTO: AFP

PARIS (REUTERS) - The French government detailed on Thursday (Sept 3) its €100 billion (S$160 billion) stimulus plan to erase the economic impact of the coronavirus crisis over two years, lining up billions of euros in public investments, subsidies and tax cuts.

The plan earmarks in particular €35 billion for making the euro zone's second biggest economy more competitive, €30 billion for more environmentally friendly energies and €25 billion for supporting jobs, officials said ahead of its official presentation late on Thursday.

With the plan equating to 4 per cent of gross domestic product, France is ploughing more public cash into its economy than any other big European country as a percentage of GDP, one of the officials said.

French Prime Minister Jean Castex said on Thursday he hoped the  recovery plan would create 160,000 jobs by 2021.  Speaking on RTL radio, he had earlier said the plan aimed at erasing the economic impact of the coronavirus crisis over two years as well as helping to avert widespread job losses. 

President Emmanuel Macron's government is banking on the plan to return the economy to pre-crisis levels of activity by 2022 after suffering this year what the finance ministry expects to be its worst post-war recession with a contraction of 11 per cent.

The plan also aims to put Mr Macron's pro-business push back on track with already flagged cuts in business taxes worth €10 billion annually and fresh public funds to give a boost France's industrial, construction and transport sectors.

Officials said the transport sector would get €11 billion with €4.7 billion targeting the rail network in particular while energy-efficient building renovations would be spurred with €4 billion for public buildings and €2 billion for homes.

The hydrogen industry, increasingly seen as a key building block in the transition away from fossil fuels, would get €2 billion over the two years of the stimulus plan.

Another €1 billion would be offered in direct aid for industrial projects, including €600 million to help firms relocate plants abroad back to France.

Some €80 billion of the overall cost of the plan will weigh directly on the budget deficit, with EU subsidies offsetting €40 billion, officials said.