France targets green investments, jobs with a huge recovery plan

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PARIS (Reuters) – France aims to spend 100 billion euros (89.11 billion pounds) to pull its economy out of one of Europe’s worst doldrums, as part of a rapid recovery plan which revives the pro-business reforms of President Emmanuel Macron with a greener tint.The $ 118 billion stimulus is equivalent to 4% of gross domestic product, meaning France is investing proportionately more public money in its coronavirus-ravaged economy than any other major European country, an official said ahead of a launch official later Thursday.

The two-year program is focused on supporting the growth of businesses, which Prime Minister Jean Castex said would receive funds on a use-or-loss basis.

It devotes 35 billion euros to make the economy more competitive and 30 billion to promote greener energy policies.

The rest will continue to support employment, training and broader social initiatives with the aim of creating at least 160,000 jobs next year.

“From an economic and social standpoint, it is infinitely better to temporarily worsen public finances in order to invest, rearm the economy and move forward than to sink into austerity and let unemployment and the human drama explode” , Castex told reporters.

France is on track for one of Europe’s worst and deepest recessions since World War II, with an 11% drop in GDP forecast for 2020 as a whole after contracting 13.8% in the past. second trimester which coincided with a coronavirus lockdown.

Macron is counting on the return of the second largest economy in the euro area to pre-crisis activity levels by 2022 – the year of re-election if he decides to run again – and the ING economist Charlotte from Montpellier said the plan would have to be implemented quickly to be successful.

However, it does not directly support the traditional engine of French growth, consumer demand. In contrast, neighboring Germany launched a € 130 billion stimulus in June with a reduction in value-added sales tax.

Instead, France is betting that by supporting jobs, the plan will give consumers the confidence to start spending the € 100 billion in extra savings they racked up during the two-month lockdown against the coronavirus.

French Prime Minister Jean Castex speaks at a press conference to present his government’s economic recovery plan after the Covid-19 pandemic, in Paris, France on September 3, 2020. Ludovic Marin / Pool via REUTERS

With already reported corporate tax cuts worth € 10 billion in 2021 and 2022, his timetable would restore Macron’s economic record while putting back on track a pro-business agenda that has sunk under the pressure of powerful unions and, of late, the coronavirus crisis.

ECOLOGY OF THE ECONOMY

The government wants the plan funds to be invested in the economy as soon as possible, and Castex has said companies that fail to use up their share quickly will see the money redeployed.

Focusing on the industry, construction and transport sectors, all of which have suffered from one of Europe’s toughest lockdowns, much of the new investment is aimed at accelerating the transition away from fossil fuels.

Macron has made it a priority since his ruling party suffered losses to environmentalists in this year’s municipal elections.

“It’s good, but it cannot be limited to two years, we have to maintain it for 10 years,” said lawmaker Mathieu Orphelin, who left Macron’s party last year to set up a party more focused on the environment.

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About 6 billion euros are planned to better insulate public buildings and homes.

The hydrogen industry – used to store and transport the energy created by wind turbines and solar panels – will receive € 2 billion over two years, a sector that Germany is also relying heavily on with plans to invest 9 billion euros by 2030.

ING’s De Montpellier said speed was essential for France.

“It remains to be seen if the amounts will be released quickly and if this plan will take effect quickly,” she wrote in a research note. “That… will ultimately determine (its) success or failure. “

Reporting by Leigh Thomas; Additional reporting by Elizabeth Pineau; Edited by John Stonestreet

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