eco TV Week

France: start of the recovery and crisis exit strategy

5/21/2021

At the same time as France’s economic recovery is taking shape, the government is also developing its crisis exit strategy, i.e. the way in which the safety net of emergency measures will be gradually withdrawn as the recovery progresses. This will be a tricky task.

Hélène BAUDCHON

TRANSCRIPT // France: start of the recovery and crisis exit strategy : May 2021

At the same time as France’s economic recovery is taking shape, the government is also developing its crisis exit strategy, i.e. the way in which the safety net of emergency measures will be gradually withdrawn as the recovery progresses. This will be a tricky task.

To use a swimming metaphor, the fear is, indeed, that many companies will drown once the life raft of emergency measures is taken away. This is why the life raft must be deflated slowly, giving companies time to be able to swim by themselves again, until they are sufficiently buoyed up by the resumption of their activity to do without aid and cope with all their costs: current, future and deferred.

In practical terms, as regards the solidarity fund, two changes are announced for the sectors most affected by the Covid-19 crisis (hotels, restaurants and culture). From June, the 50% loss of revenue threshold will be scrapped and aid will be paid whatever the loss. The amount of aid will also change. So far, it has been up to €10,000 or 20% of revenue subject to a limit of €200,000. In future, it will represent 40% of the loss of activity in June (compared with June 2019), then 30% in July and 20% in August.

As regards the job retention scheme, for the most affected sectors, the proportion of pay borne by employers will remain zero in June before rising to 15% in July, 25% in August and returning to the normal rate of 40% in September. For less affected sectors, the proportion of pay borne by companies will go from the current 15% to 25% in June and then 40% in July.

The crisis exit strategy is not just about reducing emergency aid. The aim is also to mitigate risks and support the recovery. Thus, state-guaranteed loans have been extended by six months until the end of the year, and the loans may now be used to settle debts owed to suppliers, not just to cover cash requirements as has been the case so far. Other forms of support are also being considered. For example, a proposal was made this week to introduce an expedited procedure for restructuring small companies’ debts.

The France Relance plan is also a key part of the crisis exit strategy, both working as a buffer to the scars of the crisis and supporting the upcoming recovery and future growth. Calls for a strengthening of this plan have been frequent but so far pushed back. But it could be considered in September. This would form part of the “second phase of the recovery” mentioned by Emmanuel Macron in late April. Thanks for watching and see you next week for the next edition of EcoTV Week.

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