French government to earmark €100 billion to save coronavirus-hit economy
In a bid to reverse a large downturn in economic growth and avoid mass layoffs at struggling companies, the French government, led by President Emmanuel Macron, is to present a dramatic spending plan to save its virus-hit economy on Thursday.
The impact of Covid-19 has seen the country’s GDP fall by 13.8% in the second quarter of the year, after a drop of more than 5% in the first. GDP for the whole year is currently expected to contract by 11%.
The economy briefly rebounded in mid-May after lockdown measures were relaxed, but has since shown signs of sliding backwards again. Daily coronavirus numbers are also once more on the rise in the country.
The sum earmarked (€100 billion) is a combination of new spending and tax breaks and sees a move away from the austerity measures imposed after the 2008 global financial crisis. Unlike the post-2008 crisis response, much of the new plan targets the supply and investment side of the economy, namely businesses.
Macron described the strategy last week as “pav[ing] the way for the France of 2030.”
The measures include €10 billion worth of corporate tax cuts and a focus on youth employment, with €6.5 billion aimed at encouraging the hiring of millions of new entrants into a depressed job market.
Alessio J. G. Brown has written about hiring subsidies for IZA World of Labor. He says they “can increase employment and are an effective means of supporting unemployed workers.” He says that, with sensible targeting hiring subsidies “can act as a significant countercyclical policy tool to stabilize the labor market and are an important device for supporting economic recovery.”
The French government also hopes to stimulate investment in green technologies, and help some sectors, such as health care, become more competitive.
IZA World of Labor author, Nico Pestel writes that existing empirical studies reveal both positive and negative employment effects from green energy policies. “[T]he effects are quantitatively moderate,” he notes “so the overall net employment effect is rather limited.” Pestel says that as “neither job creation nor job destruction are adequate arguments to put forward in the energy policy debate,” green energy policies should instead “be judged on whether they are able to reduce the emission of ambient air pollutants while securing a reliable supply of energy for industrial production at a reasonable cost.”
Find more IZA World of Labor coronavirus content on our curated topics pages: National responses to Covid-19 and Covid-19—Pandemics and the labor market.
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