Following the global pandemic, France’s GDP has dropped 13.8% in the second quarter alone, the worst 3-month downturn the country has experienced since records began 70 years ago. The National Institute of Statistics and Economic Studies (INSEE) reports that this sudden downturn is due to the closure of ‘non-essential’ businesses and activities between March and May of this year. Additionally, French exports declined by 25.5% and imports declined by 17.3%. However, amidst the pain of the sharp economic downturn, French president Emmanuel Macron has introduced a 118 billion dollar stimulus plan in hopes of returning the French economy to its pre-COVID state by 2022.
France plans to source 40% of the money needed to fund the plan from Europe’s newly introduced €750 billion recovery fund, intending to move away from the emergency spending required due to COVID-19 and towards longer-term investments in the country’s future. The country will spend the money on job programming, specifically in green technologies and health care, in an attempt to revive the French economy. This focus includes a €6 billion investment in the country’s health care system made shortly before the plan was introduced. The French government has stated that it will be investing €30 billion in hopes of moving towards a greener economy and €35 billion in an attempt to make the economy more competitive within the Eurozone. Additionally, France plans to spend €35 billion on job training and encouraging unemployed youth to enter a career field. They have also incentivized companies to move overseas factories and plants to France, offering both tax cuts and €1 billion in aid to businesses who focus on at-home developments.
France’s “relaunch plan” makes up almost 4% of the country’s GDP and is one of the largest relaunch plans in Europe compared to the size of the French economy. Europe’s largest economy, Germany, has declined by 10% in the second quarter, while Spain, Europe’s sixth-largest economy, has declined by a staggering 18.2%. In comparison, data from the French Statistics Breau shows in relation to this time last year, France’s GDP has dropped 19%.
While a seemingly staggering amount of resources are being used to fulfill the stimulus plan, many French officials believe the use of these resources is necessary in order to bring the French economy back to the forefront of the Eurozone. Emergency spending has pushed France’s debt burden to 120%, a “level that should not be exceeded” according to the Central Bank.
Not only is this deal expected to benefit the French people and businesses, but it will also have the potential to greatly impact the 2022 presidential elections in France. Completion of the plan by 2022 is no coincidence, as French president Emmanuel Macron is up for reelection in April of that year. French Prime Minister Jean Castex hopes that within the next year 160,000 new jobs will have been created. The new plan continues to push Macron’s pro-business reforms while including “greener” and more environmentally conscious aspects as well. With unemployment rates rising and the virus continuing to spread, it is no surprise that Macron is seeking support and positive affirmation, making the stimulus plan all the more important for his administration.
While the plan supports the overall growth of the economy, it shows little acknowledgement to the traditional method of French development and expansion: consumer demand. Germany has implemented a similar stimulus plan, spending €130 billion in addition to cutting sales tax. However, instead of focusing on consumers more directly as Germany has, France is hoping that by supporting businesses, consumers will be more inclined to return to their usual spending rates, putting money back into the French economy.
Unfortunately, it is not entirely clear yet if this plan will work to the degree that the government predicts it will. In a normal year, France sees about 79 million tourists, many of whom will not be visiting this year and will likely not be visiting in the coming year due to the ongoing effects of the coronavirus pandemic. This decline in tourism has—and will continue to—present a major challenge for the French economy, as the industry supports 2.9 million jobs and makes up 9.8% of France’s total GDP. There are very few plausible ways to regain France’s high levels of tourism in only two years, and finding a source of income as convenient and as high as that produced by the tourism industry is unlikely.
The French Stimulus Plan, in comparison to the country’s GDP, is considerably larger than plans implemented by other European countries. Not only does the plan provide economic home and growth, but it supports Macron’s bid for reelection. While only time can tell whether or not France’s new stimulus plan will benefit the country and its economy, it seems to be a step in the right direction, encouraging people to reenter the workforce and supporting French operated companies.
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