France has launched a €100bn plan to rescue its economy from the coronavirus crisis with big investments in green energy and transport as well as industrial innovation.
Announcing the “France Relance” (France Recovery) plan in Paris on Thursday, Prime Minister Jean Castex said its “historic ambition and size” made it almost four times as large as the national plan introduced after the 2008 financial crisis.
At 4 per cent of gross domestic product, it was the “most massive” plan unveiled in Europe so far relative to the size of the economy, he said.
Ministers said €30bn of the plan would be spent on the “ecological transition”, including €9bn on the development of a hydrogen industry and other green technologies, €4.7bn for the state railways and €6.7bn on improving insulation in homes and public buildings.
A further €35bn will go to industrial competitiveness and innovation, including €20bn in reduced production taxes for industry over two years and €1bn to help “reshoring” of strategic businesses in sectors such as health and IT. The final €35bn is for “social and regional cohesion”, including employment projects and skills training for the young.
France expects its economy to shrink up to 11 per cent this year as a result of the pandemic and a nationwide lockdown from mid-March to mid-May, and the state has already spent tens of billions of euros to avert mass bankruptcies and a surge in unemployment.
Public sector debt is forecast to rise to 120 per cent of gross domestic product from about 100 per cent before the pandemic.
Mr Castex and Bruno Le Maire, the finance minister, both said they expected the economy to recover to its pre-crisis level by 2022 as a result of the huge investments contained in the plan, of which €40bn will come from EU grants disbursed by the bloc’s €750bn recovery programme brokered in July by French president Emmanuel Macron and German chancellor Angela Merkel.
“It’s an ambitious objective but perfectly achievable,” Mr Castex said, adding that the government would not repeat the mistakes made in past crises of increasing tax rates to pay for the spending, but would instead generate growth to increase the government’s overall tax take. “There will be no tax rises,” he said.