PARIS—France said it plans to spend €100 billion ($118 billion) on jobs programs, green technologies and health care as it seeks to breathe new life into its economy, which has taken an outsize beating from the coronavirus pandemic.
The recovery fund represents about 4% of France’s gross domestic product, more than any other big European country, and it aims to return France’s economy to precrisis levels by 2022, the government said.
France’s economic struggles are a sign of how countries that imposed some of the world’s strictest lockdowns are finding it tough to get back on their feet. The country began a strict two-month national lockdown in early March, shutting down schools, cafes, restaurants and nonessential shops and confining people to their homes. While the lockdown helped considerably slow down the virus’ circulation it took a heavy toll on economic output, which shrank by a post-World War II record 13.8% in the second quarter of this year.
“France held on but is undeniably weaker,” French Prime Minister Jean Castex said Thursday at a press briefing, adding that the recovery fund was historical given its ambition and its size.
France’s recession is expected to be deeper than in Germany and the U.S.
Annual GDP, change from previous year
About 40% of the money will be drawn from Europe’s €750 billion recovery fund set up this summer. This represents a rare opportunity for French President Emmanuel Macron, a vocal proponent of the fund, to showcase the benefits of European Union solidarity to an at-times skeptical French public.
France was hit harder than many of its European peers because its economy relies heavily on services that were affected by the health crisis, particularly those rooted in human contact. Tourism, which regularly accounts for more than 7% of economic output and employs more than a million people, was paralyzed for months and remains severely hobbled.
Overall France’s economic growth is expected to decline 12.5% in 2020, according to the International Monetary Fund. Germany, an export-led country that rode out the pandemic by keeping many of its factories running, is expected to see its economy shrink 7.8% while the U.K.’s will decline 10.2%, according to the IMF. Italy and Spain, countries that joined France in adopting draconian lockdown restrictions, are each expected to post a 12.8% fall in economic output.
The IMF, however, expects French growth to bounce back by 7% in 2021, boosted by the government’s investments.
On Thursday, the French government said it would invest €30 billion to help the transition to a greener economy and €35 billion to make France’s industry more competitive. France will spend an additional €35 billion to support jobs, such as training for unemployed young people. That includes a €6 billion investment in the country’s health-care system
The government will cut taxes and offer €1 billion in aid to companies willing to relocate overseas plants to France.
The new package comes on top of €470 billion in emergency measures implemented by the government since March 2020. The French government offered huge tax breaks and subsidies to struggling companies. They includes a program that finances companies that placed their staff on paid leave rather than make job cuts.
Still, that may not be enough to prevent widespread job cuts and bankruptcies this fall. Companies will start laying off workers as the government gradually rolls back aid, economists say.
“The increase in unemployment is unavoidable,” AXA Chief Economist Gilles Moec said. This would have a negative impact on consumer demand, traditionally the engine of French growth, he added.
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Appeared in the September 4, 2020, print edition as ‘France Unveils $118 Billion Recovery Fund to Fight Downturn.’