What’s in France’s €100 Billion Stimulus

The big items are tax cuts, job retraining and investments in the green economy.

Emmanuel Macron
French president Emmanuel Macron chairs a meeting in the Elysée Palace in Paris, August 27 (Elysée/Philippe Servent)

France has unveiled a €100 billion stimulus program, worth 4 percent of GDP over two years, to help its economy recover from the effects of COVID-19.

The money is split almost equally between support for businesses, investments in the green economy, and health and social programs. It comes on top of the €460 billion France has spent on exemptions from social charges, furlough subsidies and soft loans to keep businesses afloat.

France is counting on the EU to provide 40 percent of the money from its €750 billion recovery fund.

What’s in the plan?

Policies include:

  • €20 billion in tax cuts for companies, particularly manufacturers, who now pay five times the value-added tax of their German competitors.
  • €16.7 billion toward reducing youth unemployment, including bonuses for hiring young workers
  • €11 billion for transportation, including €4.7 billion for rail.
  • €7.6 billion for short-time work schemes and retraining.
  • €6.8 billion in innovation subsidies.
  • €6.1 billion in additional health spending.
  • €6 billion to subsidize the insulation of homes.
  • €2 billion in hydrogen subsidies.
  • €1.2 billion toward reducing the carbon footprints of industries.
  • €1.2 billion in farm subsidies.
  • €1 billion in aid for industrial projects, including €600 million to help firms pay for relocating back to France.
  • €100 billion in bonuses for hiring disabled workers.

The hope is to create 160,000 jobs next year.

Macron sidetracked

Emmanuel Macron had staked his presidency on an avalanche of economic and social reforms, including:

  • Abolishing the wealth tax.
  • Allowing buses to compete with rail.
  • Cutting agricultural subsidies.
  • Easing regulations on small and medium-sized businesses.
  • Ending automatic pay rises and early retirement at the state railway company.
  • Harmonizing public- and private-sector pensions.
  • Liberalizing labor law to make it easier for firms to hire and fire workers.
  • Making dental services, eyeglasses and hearing aids free.
  • Raising the compensation for workers who are fired for legitimate economic reasons.
  • Raising welfare benefits and extending unemployment insurance to the self-employed.

Some of the reforms angered trade unions and the left. Others disappointed the right. Macron was counting on their effect to revive his approval rating, which reached a low of 30 percent last year and now hovers around 40 percent.

“I’m going to have to live for months with the people’s impatience,” he told Le Point in 2017.

Make that years.

Before the pandemic, all indicators pointed in the right direction. Business creation was up 60 percent since 2016. Apprenticeships were taking off. France had overtaken Germany and the United Kingdom as the top destination of foreign investment in Europe. Unemployment was at its lowest since the last economic crisis.

COVID has wiped out that progress. The Bank of France projects the economy will shrink 10 percent this year before growing 7 and 4 percent in 2021 and 2022, respectively.

Debt, already equal to economic output before the crisis, is set to rise to 120 percent of GDP.

Eying green voters

Although it was a fuel tax that gave Macron the biggest headache of his presidency, the Yellow Vests protests, and French greenhouse gas emissions are down, environmentally conscious voters in the major cities — who helped elect Macron in 2017 — are disappointed that he hasn’t done more about climate change.

A third of the stimulus program being set aside for the green economy should appeal to voters of the Green party, which did unexpectedly well in municipal elections earlier this year. Macron’s centrist alliance got just 12.5 percent support.

Macron’s party, which crushed the long-ruling Republicans and Socialists in 2017, is weak at the local level, but polls still put him in first place for the next presidential election, in 2022.