eco TV Week

France: second phase of the crisis exit strategy


As the economic recovery is confirmed, France can launch a new phase of the crisis exit strategy in order to continue the gradual removal of the safety net provided by emergency measures.


TRANSCRIPT // France: second phase of the crisis exit strategy : September 2021

As the economic recovery is confirmed, France can launch a new phase of the crisis exit strategy in order to continue the gradual removal of the safety net provided by emergency measures. As a reminder, under the first phase initiated last May, the amount of subsidies paid out as part of the solidarity fund to the sectors hit hardest by the health crisis was reduced incrementally between June and August. As to the job retention scheme, the proportion of pay borne by companies was also raised incrementally.

Under the second phase of the crisis exit strategy, the solidarity fund is extended into September (as long as a minimum level of activity can be justified) before ending in October (except in the overseas territories, where the health situation still requires businesses to be closed). However, measures are planned to bridge the gap, notably by expanding the repayment of fixed costs. September also marks the end of subsidies to help cover the payment of social welfare contributions. As to the job retention scheme, the sectors that are still disrupted by the health crisis will continue to benefit from no residual charges. A new review clause (after the one in late August) is already set for early November.

The planned ending of “whatever it takes” is not a real source of concern. The urgency is over, the emergency measures were effective, and the economy as a whole no longer needs support. Moreover, these measures have not been totally withdrawn: some global measures (like fixed costs, Government-backed loans) as well as sector-specific measures are still in place.

And the France Relance recovery plan is also bridging the gap. A total of EUR 40 bn has already been committed out of a total budget of EUR 100 bn over two years, and this year’s target has been raised to 70 from EUR 50 bn. According to the government, the plan has numerous positive microeconomic effects, notably in terms of energy renovation of private housing, purchases of greener vehicles, industrial investments and training. At the macroeconomic level, part of the dynamic momentum of the economic recovery and employment can also probably be attributed to the steady rollout of France Relance.

Lastly, the government is preparing a new investment plan in both physical and human capital that targets the strategic industrial sectors of the future. To be presented in October, the plan will have a budget of EUR 20 to 30 bn over five years according to first estimates. Following up on the broader and more heteroclite measures of France Relance, the new plan aims to prepare France for 2030 and to help with the emergence of the corporate champions of tomorrow. Thanks for watching. Tune in next week for a new edition of EcoTV Week.

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