France’s economy and finance minister announced a frightening turn of events on Monday. Bruno Le Maire said the government measures through the coronavirus crisis have cost 450 billion euros, 20% of its GDP.
The French government implemented multiple packages since mid-March. This included state-subsidies furloughs, state-guaranteed loans, tax deferrals, and handouts to small businesses.
According to the minister, state-guaranteed loans had a great impact on the budget if the borrower went bankrupt. It would mean the guarantee had to be used, even with a limit of 300 billion euros.
The government has budgeted 110 billion euros for direct crisis support for the economy. However, it’s important to note that this figure is still subject to change.
Finance minister Le Maire hopes to update the 2020 budget on June 10.
State-subsidized furloughs are among the costliest measures for the government. Starting June, the government would have to make less generous offers for it.
So far, the state has fully reimbursed the firms for about 70% of the gross wages paid to furloughed employees. Unfortunately, this figure will also decrease gradually throughout the year.
The sectors hit comparatively hard by the coronavirus will receive the most benefits for specific measures.
The French government started one for the tourism industry earlier this year. Car manufacturing will be next, launching this Tuesday, then the third for aerospace until the budget revision bill in June. French President, Emmanuel Macron, is expected to announce “strong measures” for carmakers to boost demand. However, this would require manufacturers to re-locate production into France.
France and Its Business Sectors
To compensate, France said it will cancel 3 billion euros worth of social security contributions for businesses. The sectors most affected will be in the restaurant, tourism, culture, and sport sectors.
This was due to the deputy minister for public finances, Gerald Darmanin’s, recent announcement on Sunday. He said that the country’s debt would rise to over 115 percent of the GDP by the end of 2020.
To curb the spread of COVID-19, France went on lockdown on March 17. It then ignited technical unemployment, wherein the government helped businesses to pay workers.
The upcoming GDP plummet is believed to be the direct result of this action, said Darmanin.
Restaurants, bars, and large cultural venues will remain closed until June 2, although France began easing measures on May 11.
Nevertheless, the minister claimed that over 500,000 companies could benefit from the tax relief measures. This would allow the suffering sectors to spread their social contributions over 36 months with no penalties.
But then, La Maire declared that the carmaker, Renault, could instead suffer without financial assistance from France. The firm’s Japanese alliance partner, Nissan, recently announced that it may have to lay off up to 20,000 employees.
The French currently holds a 15 percent stake in Renault. The finance minister said the state is considering a loan of 5 billion euros to help it through the coronavirus crisis.
The firm’s sales went down by 89% over the past month. Year-to-date, it decreased by 48% against the same period in 2019. It currently employs around 2642 people in Paris and builds nearly 200,000 vehicles per annum.