By akademiotoelektronik, 27/03/2023

France Relance, a 100 billion euro plan to avoid economic stall

Article updated Thursday, September 3 at 3:30 p.m.

Ecological transition, industrial transformation and social and territorial cohesion. This is the winning trifecta of the recovery plan presented by the government on September 3, 2020 at the end of the Council of Ministers. Called "France Relance", it will weigh nearly 100 billion euros, after the 470 billion euros already committed since confinement, devoted to partial activity which concerned 8 million employees, the loan guaranteed by the State and the various sectoral plans (aeronautics, automotive, tourism, etc.).

Read also: Sovereignty, ecology, solidarity, youth employment... the 4 axes of the Recovery Plan that we know

40 billion come from the EU

Invested between the end of 2020 and the end of 2022, these 100 billion euros which will be included in the finance bill for 2021 represent the equivalent of 4 points of GDP, i.e. four times the 2008 recovery plan and, according to the Prime Minister, will be "the most massive plan announced to date among the major European countries". If 40 billion come from the European Union, “virtually all expenditure will not be sustainable” with the exception of production taxes. Half of the plan will therefore be financed by Europe, which thus contributes to the revival of the French economy.

4 points of GDP is the equivalent of the loss of wealth caused by the Covid-19 crisis, and Matignon is counting on the leverage effect generated by these 100 billion, on public investment and private, in order to catch up by the end of 2022 with the level of GDP at the end of 2019. And avoid a lasting stall in the French economy. Faced with criticism from those who think that even 100 billion is insufficient to meet this objective, Bercy is confident. The calibration of the plan is "at the right height" and "in line with what the Economic Analysis Council had recommended in July".

Another challenge raised by the plan is to be “sustainable” when the public debt will reach the record non-wartime level of 120% of GDP at the end of 2020. At Matignon, we assume: “the worst option would have been to do nothing. When you lose 4 points of GDP, it's a considerable weakening”. According to Jean Castex, the additional debt generated by the plan will be absorbed from 2025, thanks to the leverage effects on potential growth. Another promise, which does not commit a possible new majority after 2022, “the return to balanced public finances will not be achieved by tax increases, but by catching up on lost growth”. The idea is to keep a double promise: to revive activity and employment in the short term while preparing the horizon for France in 2030, as requested by the Head of State. In short, act “immediately” to support employment and protect skills and direct the economy towards the sectors and professions of the future, in coordination with the territories. To make this crisis "an opportunity for transition to the jobs of tomorrow", the plan is based on three pillars which will each benefit from around a third of the expenditure: 30 billion euros for greening, 35 billion for competitiveness and relocations and 35 billion for social and territorial cohesion. "The plan will produce concrete and perceptible effects for the greatest number" committed Jean Castex with "absolute priority" employment. The objective, assured the Prime Minister on RTL, is to have rapid results: he expects 160,000 job creations from 2021, while 800,000 jobs risk being destroyed this year.

With this plan, the idea is to provoke an electric shock: "I call on all French people to have confidence in the recovery of the country". Like a mantra, the Prime Minister like the Minister of Economy, Finance and Recovery, Bruno Le Maire repeated it: "we will get there". In total, by injecting 100 billion euros over two years into the economy while France will experience an 11% recession this year, the government wants to create a confidence shock for households by encouraging them to spend the 100 billion of savings accumulated during the months of confinement, and the companies which Bercy fears will put a brake on their investments.

30 billion for the ecological transition

France Relance, a 100 billion plan euros to avoid economic stall

In detail, 30 billion euros will be put at the service of the ecological transition. "This is what is necessary to be on the right trajectory of carbon neutrality" underlined the Minister for the Ecological and Inclusive Transition Barbara Pompili. She hailed "a giant step" towards the green transformation of the country. Especially since, according to her, we must add to these 30 billion, the sums devoted to training in environmental professions, as well as the induced effects of relocations on the reduction of "imported" carbon emissions. Of this total, 11 billion will be allocated to transport, half of which for rail, public transport, cycling and charging stations, and 7 billion for building and energy renovation. Specifically, 4 billion euros will finance the renovation of public buildings (State, communities) and 2 that of housing.

Read also: "The climate requires us to multiply by ten the number of jobs in renovation"

In this area, assistance will be concentrated on the MyPrimeRénov' system. Intended for individuals, without a priori resource conditions, this product from the National Housing Agency (Anah) will be accessible to all French people from January 1, 2021 “targeting global renovation”. 500 million euros will go to heavy rehabilitation of social housing. As well as 200 million for VSEs-SMEs and a line of credit, provided by the Ségur de la Santé, will be earmarked for hospitals and nursing homes.

Still in this envelope of 30 billion euros, 9 billion euros will benefit the decarbonization of industry. For example, 2 billion euros will be used to “take off” the green hydrogen sector, that is to say whose electricity is of renewable origin. The future investment program will add 5 billion euros over the decade, which will make a total of 7 billion (compared to the 9 billion that our German neighbor devotes to it). Regarding the agro-ecological transition, the plan provides 1.2 billion euros in favor of organic, short circuits and HVE3 agriculture with high environmental value. Finally, 2 billion will go for biodiversity, the circular economy and resilience. 300 million will thus be used to support work to overhaul water and/or sanitation networks.

34 billion for competitiveness and sovereignty

The competitiveness of industry and the revival of investment, which Bercy will pilot, represents another package of expenditure, of 34 billion euros over two years. 20 billion will be made permanent with the reduction of 10 billion euros in 2021 and then in 2022 in production taxes. “It will be concentrated on industry and ETIs, the weak link in the French economy”, justifies Bruno Le Maire. It will be compensated for local authorities and will be concentrated in three tax measures: the reduction of 50% of the contribution on the added value of companies (CVAE) for 7.25 billion, the reduction of 50% of the property tax for 32,000 companies , i.e. 1.75 billion, and the lowering of the cap on the territorial economic contribution from 3 to 2% on the added value, i.e. 1 billion. “The gain will benefit 42% to ETIs, 32% to SMEs and VSEs and 26% to large groups”, explains Bercy.

Read also: Simplification: Griset "wants the State to support and advise entrepreneurs"

As for the 3 billion euros of reinforcement of the capital of companies, they will be translated in particular in the form of guarantees for a total amount of 3 billion euros to transform the loans guaranteed by the State into equity loans long term. Investment funds will also be able to participate in this consolidation of private sector indebtedness thanks to an additional volume of guarantees of up to 1 billion euros.

Industrial territories will be at the heart of the recovery, with nearly 1.6 billion euros in investment subsidies for projects located there. Not to mention 11 billion euros in new spending under the Investments for the Future Program (PIA) 2021-2022. This will target in particular, in addition to the Hydrogen plan, new biosourced energies and new recycled materials, the decarbonization of industry, and future technologies such as cybersecurity, artificial intelligence, the Cloud and quantum as well as health and biotechs.

The digital transformation of the economy will not be outdone: 1.6 billion euros will be devoted to the digitization of the State and territories, 385 million euros for the digital transition of VSEs-SMEs, or 500 million euros for the deployment of very high speed, fiber and mobile.

Read also: Mobile: the State continues its crusade against white areas

36 billion for social and territorial cohesion

To heal the wounds of the crisis, the Minister of Labor Elisabeth Borne will have an envelope of 36 billion euros which will be intended both for the extension of partial activity in negotiated agreements and to invest massively in adapting skills to the professions of tomorrow. A “youth plan” will thus include 4,000 euros in charge compensation for a company that wants to hire a young man or a young woman. “Never has it been so cheap to hire an apprentice” hammered the Prime Minister who calls on companies to “play the game”, while no conditionality has been imposed on aid. 200,000 additional training places, for example in energy transition or digital transformation, including 100,000 "free" places, will also be offered. More generally, 1 billion euros will be released to “help employees and job seekers”.

The objective is to find a solution for the 750,000 young people who will enter the labor market at the time of an unprecedented economic crisis. This is undoubtedly the most spectacular social dimension of the plan: orienting career paths and vocational training towards the professions that the France Relance plan wants to encourage: green jobs in the environment, "grey" jobs in the care and of “care”. "Our objective is to respond to the search for meaning of the younger generations", says one in the entourage of the Minister of Labour, Elisabeth Borne.

Finally, 7.6 billion euros will be mobilized for an unemployment shield to enable the most weakened sectors to get through the crisis without losing skills, as we have seen with the deindustrialisation of the country. A combination of long-term partial activity (6.6 billion) and targeted training (1 billion) will be backed by company agreements to create retraining and job adaptation paths. Employers will have to commit to maintaining a minimum of 60% activity to benefit from it. The Prime Minister will organize a social dialogue conference in October to get the ball rolling at a time when the economic difficulties are likely to worsen in a number of sectors hit hard by the crisis.

Public-private and state-local community partnerships

There remains the risk of seeing this gas factory of nearly 70 different programs involving such a considerable sum getting lost in the sands of the deep state and the finicky bureaucracy of which France is a world champion. Aware of this risk, the Prime Minister will himself chair a monthly interministerial committee to monitor the France Relance plan. The 100 billion euros will be included in a single interministerial mission, said Bruno Le Maire, who will provide weekly management.

Another innovation, sub-prefects in charge of recovery will manage the programs in order to ensure equal access in all territories. The administrations concerned will be judged on the results: "if a program is slow to materialize or is too late for red tape, the State will re-allocate resources to other priorities", we warn at Matignon. With this "sunset clause", the Prime Minister wants to make the ministries responsible.

Last point to consider: the partnership dimension, public-private and State-local community, will aim to amplify the impact of the plan by playing on the leverage effect. The territorialization of the plan will be the rule, whenever possible, promised Jean Castex who hopes that the "hundred flowers" will bloom throughout France to propose initiatives. To this end, the Prime Minister will bring the regional presidents together next week to encourage them to multiply the impact of the plan using their own intervention tools. The idea is to achieve a State-community contract program by program. Exchanges have started with the associations of elected officials and the first signatures will take place in the next fortnight. Perhaps it will be a question of the state of the bridges, for which 350 million euros have been provisioned.

Read also: Maintenance of bridges: the Senate votes a fund, the Assembly should not follow

Philippe Mabille and César Armand

11 mins

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