France unveils €100-billion economy rescue plan

France unveils €100-billion economy rescue plan”

President Emmanuel Macron's government has earmarked €100 billion to counter the devastating impact of the coronavirus at a time when daily virus numbers in France are on the rise again. Prime Minister Jean Castex hailed the plan saying it aimed to stop unemployment rising by creating at least 160,000 jobs by next year.

The money will be divided three ways, with $42 billion going towards making French businesses more competitive by slashing corporate taxes, now among the highest in Europe.

French households have accumulated 80 billion euros in savings since March, significant firepower if people could be induced to spend, analysts say. Small and medium-sized enterprises are expected to be the main beneficiaries.

Beyond emergency measures, the government also hopes to stimulate investment in green technologies, and help some economic sectors such as health care become more competitive.

A further $35 billion has been set aside for green initiatives, including building renovations, transport and the development of a hydrogen industry. Training programs and bonuses for companies that hire those aged under 25 are part of the plan.

Unveiling the plan, whose €100bn price tag is the equivalent of 4% of France's annual economic output, Prime Minister Jean Castex said it was nearly four times bigger than the rescue strategy implemented after the financial crisis of 2008.

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However, it does little to directly support the traditional engine of French growth, consumer demand.

Denis Ferrand, director of economics research institute Rexecode, said the strategy of favouring corporate investment over consumer spending made sense "because household revenues have remained relatively intact". Castex said the government won't raise the country's already high taxes to pay for the rest, but will issue new treasury bonds instead.

Called "France Reboot", the plan will include 40 billion euros ($47.3 billion) in aid from a European Union-wide rescue plan approved in July. It's the country's largest stimulus ever, more than four times the size of the one introduced after the global financial crisis of 2008.

France is on course for one of Europe's worst recessions, with an 11% drop in economic output forecast for 2020 as a whole.

The government expects the economy to shrink 11 percent this year, but Catex and the country's Finance Minister Bruno Le Maire said on Thursday that growth should recover to its pre-crisis level by 2022.

"It's ambitious but perfectly within our reach", Castex said.

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